Insights on Business

A new era of technology enabled financial risk management (Part 1)

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In this series of blogs, we will focus on four transformative technologies with emerging risk applications that can help banks and financial institutions grow profitability and protect the enterprise.

AI and the rise of digital humans in financial services

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“AI is not going to replace managers, but managers who use AI will replace the managers who do not,” Rob Thomas, IBM General Manager of Data and AI predicted at IBM Think 2019. [1]

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IBM OpenPages with Watson named one of 2019 Gartner Peer Insights Customers’ Choice

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This is a great moment for IBM. IBM OpenPages with Watson has been named one of the 2019 Gartner Peer Insights Customers’ Choice for Integrated Risk Management Solutions.

Thinking Forward: Financial Services and the AI Revolution

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Artificial intelligence is changing the game. According to Stanford professor Andrew Ng , AI is the “new electricity,” already generating billions in value as it transforms industries such as IT, health care — and now financial services.

Stop money laundering with a proactive AML approach

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The recently revealed $8.8 billion Troika Laundromat offshore money laundering scandal was a vast and complex deception.

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Solve your quota setting challenge: Start with Design Thinking

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You’re probably familiar with philosopher George Santayana’s admonition: “Those who cannot remember the past are condemned to repeat it.” While that’s hard to dispute, most of us will admit to occasionally falling short.

Beware of data “science projects” turned fraud prevention solutions

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As e-commerce has revolutionized the way we buy and sell online, we are no longer bounded by borders or time zones. Goods can be purchased from anywhere around the world at any time of day. Because of this, traditional rules-based fraud detection systems have become outdated and no longer work.

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IBM and Thomson Reuters join forces to simplify how financial institutions tackle regulatory compliance challenges

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In the financial services industry in the United States, one thing remains constant – change. Whether policy makers are encouraging deregulation, or increasing regulatory requirements, regulatory change has been a constant. As recently as two weeks ago, the U.S.

Why shell companies are so risky (and hard to spot)

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Shell companies and the hidden threat of entity risk. While not inherently illegal, shell companies have been getting a lot attention recently for the role they play in illegal activity.

Why shell companies are so risky (and hard to spot)

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Shell companies and the hidden threat of entity risk. While not inherently illegal, shell companies have been getting a lot attention recently for the role they play in illegal activity.

Is “openness” the next big word in financial crime?

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About a month ago, I attended the IBM RegTech Summit in London, which brought together a mix of financial services professionals, regulatory experts and technologists. But the terminology was markedly different than most financial crime and compliance events I’ve attended.

How AI is redefining financial crimes detection technologies

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There is a quote in the most recent Star Wars movie, “The Last Jedi” that gets me thinking about innovation; ‘We are the spark, that will light the fire” The Star Wars movies, books, games and mythos is a masterfully woven tapestry telling the tale of a little guy triumphing over an established, organized and technologically advanced pan galactic empire. This is accomplished through the disruption of established norms and with a lot of luck. While some would argue the Empire did nothing wrong I think we can all agree that if you staunchly refuse to change how you go about business you are enticing challengers to step up. Technological innovation is a reality that is impacting every facet of society. No area of human endeavour from retail, to transportation, to banking has not seen some form of disruptive technology replace the long-established modus operandi. Financial crime detection is primed for a similar renaissance to drag it from antiquated costly approaches to embrace a new era of cognitive intelligence and automation. People and organizations with a focus in financial crimes have been looking for transformative approaches for the last decade. The technologies that have the potential to radicalize the approaches to solve these problems have really only begun to emerge in the last two years. The key technologies at play are artificial intelligence techniques and enterprise scaled automation that impact every layer of the financial crime detection process from data acquisition to operations. Real world experimentation by the biggest banks in the world has begun to assess the applicability and scalability of these technologies. Some banks have already proven the value of these solutions, but maturity is necessary in order to win over the regulatory sector and prove out the power of artificial intelligence to a sector that is hesitant to embrace it due to fear of regulatory upheaval. The banks need this machine-driven revolution to succeed in order to battle rising regulatory costs globally. The estimated global cost of compliance is $320bn and the penalties for not meeting regulatory obligations continues to skyrocket impacting share value and the banking sectors bottom line. Part of the issue is being able to affect change by removing cognitive biases from critical financing crime decision processes. Cognitive biases like the Anchoring Effect, Confirmation Bias, Ingroup Bias and Planning Fallacy to name a few, are key traps financial crime operational teams fall into. Analysts end up forming cognitive biases based on their individual experiences over the course of their careers and subconsciously apply them in their day-to-day activities. Only through the utilization of technology can a bank avoid these biases by taking into account the experiences of the broader enterprise and team and ensuring the right decisions are made. Regulatory enforcement actions are on the rise. Focus on corporate entities and understanding the intricacies has become burdensome as the complexity of payments infrastructure continues to evolve and due to the burgeoning use of technology by criminal elements for illicit intent. As the regulatory and enforcement environment continues to be embattled by continued use of enforcement actions, it is becoming clear that governments will focus on individuals to be more impactful in deterrence mechanisms. As a result, the need for better and more cohesive technologies around entity resolution will become a compulsory capability to avoid punitive measures by governments cracking down on banks that do not have critical visibility on whom they are banking and ultimate beneficial owners associated with their book of business. Returning to our analogy we can understand that artificial intelligence technology is the spark which will light a fire to build a new wave of technological disruptors across the financial crime sector. We can already look at the marketplace and see evidence of how these disruptors are challenging the established norms of detecting illicit activity in complex financial data patterns. The regulators are taking notice and have already begun to invest themselves in capturing a snapshot of the state of the art and to understand what provisions will need to be made in national legislation to allow this revolution to take hold. Unlike the movies it took years for the empire to fall within the literature that builds out the Star Wars universe. We don’t have years to play with as the cyber-criminals of today are a smarter and more technologically savvy breed then we’ve previously encountered. In order to combat them we need to bring this innovation to the forefront of our business plans and execute against it. Only then will we be able to use the power of the machine to better our society in terms tackling the burdensome yoke of financial crime. Learn more how IBM is driving innovation in Financial Crimes surveillance technologies. AI Featured Carousel Featured Homepage RegTech AML cognitive FinCrimes FinTech IBM RegTech Innovations innovation KYC

Artificial Intelligence is a game-changer, but are you AI-ready?

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At the October Money 20/20 in Las Vegas, Yousef Hashimi, Vice President and Partner of IBM Cognitive Big Data and Analytics, and Rob Palacios, Executive Vice President and Director of Texas Capital Bank (TCB) Labs, sat down for a fireside chat about driving value in organizations with artificial intelligence (AI) and what it takes to be AI ready to reap the benefits of building solutions rather than just buying components of AI technology. Developing trust was a reappearing theme throughout the discussion. Since the TCB business serves middle market clients and is a commercial-focused organization, it doesn’t rely on brick and mortar stores. Therefore, Palacios says, the bank seeks to use technology in ways to minimize any disadvantage that a lack of physical stores might cause. The first TCB Labs AI pilot focused on finding business customers that fit to the products and services that their bank could provide. Banks often spend a huge lift and amount of time on trying to find the right next client, right next product, and how to serve the client better. So TCB wanted to look at external and internal data performance that would allow them to better source clients and to better identify, rank, and match clients to their portfolio–improving overall customer relationship management. Palacios was exploring cognitive robotics processing automation (RPA), artificial intelligence, machine learning, blockchain, and fintech partnerships, but he knew the real challenge with the use of emerging technology would be the cultural change that had to happen in the business. Trust was a key component for achieving success on a variety of fronts. Trust in how AI can provide business value. Palacios explained that stakeholders and employees want to trust that innovation teams are not simply exploring technology for technology’s sake and that the innovation will lead to true business value. If you can’t deliver value, you’re not valuable. Thus, TCB tied their AI project to their five-year business roadmap and the way they make money or reduce a lower cost of ownership. Palacios remarked, this alignment “gets more people in the boat with objectives that align with what we’re trying to do and allows for the culture to coalesce.” Trust in AI expectations. Palacios also noted it was important to set expectations in the AI project early on since people can get really excited about AI and think that it is a silver bullet for all of their problems. He says it is important to help the business understand that while AI will help with the initial lift, it isn’t a silver bullet. He encouraged others not to focus on the AI, but rather the change in user experience that the company is trying to effect. AI is a part of that, but design thinking and data work and other things have to happen to get to the end of result the business wants. If teams don’t make it just about the AI, others will lower their expectations that the AI will solve everything. The team needs to explain that it is how the company adopts and rolls out the AI project that will affect the way the company achieves the actual business value. Trust in the AI data and the innovation approach. Palacios also explained that data itself causes a trust challenge with AI projects. Given the amount and unwieldiness of data, it’s hard to always trust the data. How do you get the right data dependably where you can actually do something with it, with machine learning and cognitive? Palacios highlighted the importance of choosing the right AI partner so TCB could “fail quickly” to get to the right outcome more quickly. He shared that TCB looked at three business models when choosing an AI partner, with the question, “How can I get to the market fastest?” top of mind. TCB Labs looked at three possible AI innovation business models: 1. Should we hire 20 TCB labs staff: Data scientists, design thinkers, technologists, change management folks? But it would be tough to find the right people to come in at the right time and start driving value immediately. 2. Can we cobble together a lab by picking and choosing people from different organizations and consulting agencies? Yes, but this approach could be expensive and difficult to create synergy among the different parts. 3. What about an already trusted partner? IBM introduced TCB Labs to the IBM Garage concept , a one stop shop for bringing together all the different resources to create an innovation organization on a subscription basis. TCB chose the last approach and was able to start innovation from day one instead of spending time hiring. Palacios emphasized that design thinking was helpful because they were able to look at business problems first and how to solve them. And since they were able to use a fail fast model, they could move quickly to NOT focus resources where they saw low possibilities of success. Trust in the AI and human relationship. Hashimi praised TCB for their success and lessons learned and emphasized the importance of considering the psychological impact on humans and their trust in AI. Automation often seeks to eliminate tasks for human beings, and employees fear the loss of their jobs and livelihood. IBM’s approach to AI is not to replace humans, but rather to create augmented intelligence that helps amplify human cognition. Companies should ask: How do you leverage technology to help humans do what they do better? And how can technology bring value in such a way that it allows them to do higher value things? –> Learn more about IBM Banking and Financial Markets solutions. Watch the full AI fireside chat at Money20/20 below. Watch the video. AI Banking Featured Carousel Featured Homepage FinTech News & Events banking Money20/20 Money20/20 2018

Ground attack or air strike: Winning the banking customer battle

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You have the mission to grab territory. You called in the lieutenants to devise a strategy. The Air Force general makes a strong case to efficiently blanket the territory with air campaigns. The Army favors the tried-and-true approach of gaining ground inch-by-inch.

The top five challenges and opportunities for AI in RegTech

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In the span of a just few years, artificial intelligence (AI) has gone from a niche, relatively abstract concept, to entwining itself in multiple aspects of our daily lives.

How financial services firms are using chatbot technology to transform their businesses

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The IBM Watson Assistant team has been busy in the past year helping clients implement state-of-the-art chatbots. The financial services industry is one of the fastest adopters of this technology. As a result, at IBM Think 2019 you’ll be able to find a number of client-led sessions.

Is your sales performance management mid-year correction strategy effective?

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Building a strategy and doing the right planning in order to achieve corporate objectives is the key to any business, and no doubt, planning sales compensation plays a crucial role in meeting those goals.

Celebrating International Women’s Day with more than 100 years of IBM empowering women

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“If the bringing of women – half the human race – into the center of historical inquiry poses a formidable challenge to historical scholarship, it also offers sustaining energy and a source of strength.” ” – Dr. Gerda Lerner.

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How banks are using incentive compensation management to help increase revenue and drive growth

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In a competitive financial marketplace, banks are turning to incentive compensation management (ICM) solutions for competitive advantage.

IBM Open Banking Platform launch: Key takeaways

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In today’s financial services industry, issues ranging from new regulations to unforeseen competitive pressures are placing ever-growing pressure on traditional banking institutions to move toward open banking models. To address this need, IBM introduced the IBM Open Banking Platform.

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Five common sales performance management implementation mistakes

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Has your company recently invested in a sales performance management (SPM) solution? If so, you are likely feeling a mix of relief and anticipation at achieving this milestone.

Capitalizing on Open Banking as a catalyst for digital transformation

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There’s a new normal in financial services. Regulations such as the second payment services directive (PSD2) and the Open Banking project spearheaded by the UK’s Competition and Market Authority (CMA) are driving disruption in the banking value chain.

Why real cross-channel payment data integration matters

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According to the 2019 AFP Payments Fraud & Control Survey , Automatic Clearing House (ACH) payment fraud increased significantly in 2018, reaching a new record with 82% of organizations reported incidents.

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Lessons learned from recent incentive compensation management war stories

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In my travels to clients, I hear many war stories. Recently, these have come from new clients with recent wounds. These wounds often go deep – there are tales of long days, lost weekends, and swaths of frustrated team members.

Risk.net names IBM for “Financial Crime Product of the Year” and “Best Vendor for Innovation”

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While there is no prize for stopping financial crime (though, arguably there should be), occasionally there is recognition for being an integral and pioneering part of the overall financial crime management effort.

Advancing Innovation in the Global Financial Services Industry

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IBM RegTech Innovations. Advances in artificial intelligence (AI), blockchain, and cybersecurity are poised to transform the financial services industries.

IBM in “Leaders” Quadrant of 2019 Gartner Magic Quadrant for IT Risk Management, fourth report in a row

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Our goal has always been to provide our customers with the tools and insights that help them meet their governance, risk and compliance (GRC) needs, and we do so, by leveraging the innovation of IBM within a single ecosystem.

Stop waiting to apply AI for financial crimes

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Challenges from financial crime incidents and penalties grow. Criminal enterprises are becoming increasingly sophisticated at the same time as new payment methods are emerging (peer to peer and faster/immediate payments) and transaction volumes are exploding.

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Three reasons for risk analysts to get ready for quantum

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Rather than explain how quantum systems work, let’s discuss what quantum will do. For the financial industry, how is quantum computing helping? What problems will it solve in the future? How and why are financial institutions getting ready for quantum now? For more insights see my ).

Sales stories from the front lines: Lessons from clients in driving sales behavior

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Sales is the lifeblood of business.

Taking a risk-based approach to compliance management

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While deregulation has been a trend over the past few years, compliance monitoring and regulatory change management remains a top focus for financial institutions of all sizes.

Succeeding in the future of payments

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Embracing the future in the age of instant gratification. The payments industry is at an inflection point. Customers increasingly demand new payment options like real-time payments and P2P payments, underpinned by security and trust.

It’s time to embrace customer data privacy and security

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Customer data is the modern enterprise’s most valuable asset. For years, enterprises have collected and stored it without giving it a second thought. Now, new technology, business and regulatory challenges are forcing them to rethink how they collect and manage that data. Customer data drives innovations like artificial intelligence and blockchain solutions. For most companies, it fuels increases in their share of existing markets, and it’s the key to unlocking new ones.

Where is the Financial Services Industry in the digital transformation journey?

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At last month’s Money20/20 conference, the event brought over 10,000 people together and hosted speakers from start-up disruptors to incumbent financial institutions, and everything in between. IBM was there in full force. And I had the pleasure of hosting a panel of CEOs three mornings in a row.

Boost efficiency through operational innovation in financial services

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Now, more than ever, banks must be smarter and faster. Operational innovation is vital in a highly competitive financial services sector, with a new community of digital banks and other firms vying for market share. CFOs in financial organizations are not taking this challenge lightly.

You can’t manage what you don’t measure

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“I don’t have enough data,” is something that I have never heard from a client. The real challenge today is finding the right data. Fundamental to sales performance management (SPM) is what we call Sales Performance Measurement.

Accelerate sales productivity with an AI digital assistant

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Digital assistants today can deliver far more services beyond sophisticated call routing. Infusion of artificial intelligence (AI) functionalities adds the potential to increase seller field time, improve sales performance and help lift HR productivity.