The warning follows a string of high-profile cases of international banks facing multi-million pound fines for breaking AML (anti-money laundering) rules and sanctions violations.
Soon, however, this heightened level of forensic investigation by legislators and regulators globally is set to cascade down through the financial services sector as a whole — and affect even the smallest firms.
Big Data platforms are increasingly being used by regulators to automate the process of scanning vast data ecosystems for financial crime.
As a result, they are helping them to expose fraudulent and other illegal activities — and the companies that are embroiled in them, even if unknowingly — far more quickly.
While the fines faced by smaller financial services firms won’t be anywhere near as large as those faced by the major international banks, the reputational damage done to them, in relative terms, could be profound.
Freddie McMahon, director, strategy and innovation, at Anomaly42, said: “For UK financial services firms of all sizes, the rising intelligence and falling cost of Big Data analysis is proving a double-edged sword.
"On the one hand, Big Data platforms are being used in-house to uncover new market intelligence and customer insights. On the other hand, they are increasingly being used by financial regulators and legislators to expose financial crime and any firms mixed up in it, even unwittingly.
“Moving forward, compliance departments are going to have to be even more forensic in their KYC processes. To properly defend their firms' reputations and bottom lines in a newly transparent market, one-off, or infrequent, KYC will rarely be enough. A new form of KYC that is embedded and ongoing will have to become the modus operandi, or firms will suffer the consequences.”
