The last year has seen tremendous change to the financial industry, first with the continued impact of COVID-19 on financial markets to the wider implications of the recent leak of the Pandora papers alike. As the year ends, some of our key stakeholders in Fenergo share their insights into some of the biggest issues and trends which will look to shape 2022.
Increased Digital Transformation Due to Bank Executive Changes
Change will be afoot across the financial industry in the New Year with some of Europe’s biggest banks, including Deutsche Bank and Barclays, appointing new leadership. Marc Murphy, CEO at Fenergo expects wider implications to digital transformation within these banks.
“With new leadership comes expectation of change and with that, the new executives will likely want to modernise from the top down. In addition to this, digital transformation is likely to play a significant role in 2022 as banks gear up to comply with ESG and other regulations while striving to win in customer experience and to reduce costs.”
Asset Management M&A Consolidation
Schroders’ acquisition of Rivers and Mercantile’s fiduciary management business is just the latest in a long line of merger and acquisition (M&A) deals across the sector this year.
Moving into 2022, our CTO, Niall Twomey suggests there will be continued efforts to see whether asset managers can remove longstanding technology headaches post some of these high-profile acquisitions. “One of the biggest challenges around in the wake of any acquisitions deal is data management. Even the more established firms have their data held across siloed systems – which presents a clear risk from a regulatory perspective.”
“Having client, fund and counterparty information held across different parts of the business not only creates a significant compliance headache, but it also means the end investor is not receiving the best experience. For any asset manager looking to on-board newly acquired funds, a centralised data strategy leveraging cloud technology is essential to pull all the information together and consistently maintain it.”
A Complex Regulatory Landscape
The regulatory landscape for financial institutions has never been more complex. The velocity of change is increasing and the lines between regulations such as financial crime, ESG, reputation risk and fraud etc, are increasingly blurred. Cengiz Kiamil, Head of Product Strategy predicts the following:
“Operational efficiency and a focus on automating compliance will be front of mind for banks in 2022. Financial institutions won’t keep clients if they continue to take a long time to provision services. For too long now, employees have had to manually re-enter the same client information into disparate and numerous IT systems which do not talk to each other. When it comes to data, third party is the way forward but the key to success will be how we define verification standards.”
“Whilst still satisfying regulators, banks will get serious about finally replacing legacy tech with API-connected technology ecosystems which streamline data and policy management to ultimately improve time to revenue and client experience. These will be the banks that perform best in 2022.”
Global AML Reform
Rachel Woolley, Global Director of Financial Crime shared her insights on AML reform: “The recent Pandora Papers leak and the FinCEN files before that have proven that financial institution enforcement actions are not enough of a deterrent to financial crime. As a result, 2022 will see more widespread AML reform as regulators seek to close the net on systemic money laundering and financial crime. Banks can no longer be the only firms held accountable. We’re already seeing that with the AML Act in the US which brings antiquities firms into scope, and the increase of non-financial firms such as gambling companies and casinos receiving fines in the UK. Our analysis has shown a dip in fine values in 2021 primarily because there were no billion-dollar AML-related fines for the first time in three years. The pandemic also caused many in-person investigations within banks to be put on hold which has a knock-on effect on enforcement actions. If the situation stabilises, we could see regulators play catch up and initiate several new investigations in 2022.”
Focus on Financial Crime Solutions
Ned Kulakowski, Senior Financial Crime Consultant at Fenergo North America, provided insights on the rise of Cryptocurrencies and AML: “2022 will demand an increase in governments being more proactive when it comes to addressing and preventing increasingly sophisticated methods of financial crime. Outside of government control, the industry continues to face new challenges in the anti-money laundering and financial crime space that go beyond the more traditional form. An even bigger uphill challenge for regulators will be dealing with the ever-developing virtual currency world, as digital assets provide a breeding ground for money laundering. The rising threat of ransomware attacks and payments via cryptocurrencies is another trend that is deeply concerning for regulators and financial institutions. There will not be a ‘one size fits all’ type of solution – it will require specialised, intelligent technology solutions that help financial institutions better understand the behaviours and risk presented by clients throughout their lifecycle. Keeping pace with responsive change will be crucial for the constant challenge and reality of regulatory flux for financial institutions.”