Charles Southwood, Regional VP – Northern Europe and MEA at Denodo

In recent years, financial services (FS) organisations have faced a significant increase in regulation. Due to their very nature – and the services that they provide – they are continually being placed under the heaviest of scrutiny when it comes to achieving compliance and data governance.

Whether it’s corruption, money laundering or potential financial fraud, greater rigor is being introduced and the goal posts are moving. In fact, between 2008 and 2016, there was a 500% increase in regulatory changes in developed markets. To add to this, just last month, KPMG UK’s Regulatory Barometer discovered that the regulatory pressure faced by UK FS firms was up to a score of 7 (out of 10), showing no let-up for those having to deal with the impact of these changes.

When it comes to compliance, even when those operating in the FS industry think that they are on the right track, they cannot afford to become complacent. Failure to toe the line could lead to potentially crippling fines and reputational damage. As a result, compliance has never been higher on the boardroom agenda.

The data challenge

Navigating the legal landscape – and the ever-increasing number of regulations – is only part of the puzzle when it comes to why compliance is proving challenging for those in the sector. Another piece is the sheer volume of data that FS organisations are expected to juggle on a daily basis.

As a result of the digital transformation taking place across the sector, in recent years there has been an exponential boom in the amount of data and personal information that FS companies need to manage. If used correctly, this data could unlock multiple opportunities, both in terms of revenue and customer experience initiatives. However, more often than not the data combinations needed are complex due to issues of data quality, different formats, data silos and different locations (including data sovereignty issues).

To further complicate matters, some FS organisations do not have the appropriate technological infrastructure in place to deal with this new data paradigm. Instead, they are relying on traditional – and often inefficient – data and analytics strategies. For example, when it comes to know-your-customer (KYC) data collection and maintenance, many banks are still using basic customer calls to correct any information that is outdated or missing. This often leads to poor data quality and makes aggregation difficult. This in turn limits an organisation’s ability to both automate transaction monitoring and perform due diligence.

Even if data quality is preserved through this collection process, the challenge doesn’t stop there. Whether structured, semi-structured or unstructured, data is usually stored in many different places across a business, including data lakes, on premise and in multi-cloud environments. As such, FS organisations can find it extremely difficult just to find out exactly what information they are storing, let alone ensure that they are meeting the many requirements laid out by industry regulations.

Taking back control

This is where modern technologies such as data virtualization can help. By providing one single, logical view of all data, no matter where it resides or what format it is in, data virtualization grants early and high visibility of information, making the compliance challenge easier to overcome. By using a ‘logical’ view for data insights, governance, security and compliance can be effectively and consistently managed through a centralised platform and with federated ownership, as appropriate. This vastly improves control and obviates the need for repeatedly moving and copying the data around the enterprise.

Data virtualization can aggregate and manage data in real time, for both internal and external data sources. This can help FS organisations with sanctions screening and also enrich the KYC process, enabling teams to quickly identify both risks and opportunities.

One organisation already reaping the rewards of this type of technology is SpareBank 1 Forsikring, a Norwegian pension product company. To comply with anti-money-laundering (AML) legal requirements, the company launched a new risk assessment process. This involved scoring every new customer on the risk of money laundering and terrorist financing using data from various data sources, including money laundering registers, politically exposed persons (PEP) databases, and sanctions lists. However, SpareBank 1 Forsikring’s traditional data warehouse, with a 3-to-4-layered architecture, was not agile enough to support these requirements.

In order to combat this, SpareBank1 worked with Denodo, utilising its data virtualization technology to design a new data platform called the Information Platform of Pension (IPP). This gathers and consolidates data from various kinds of external and internal sources and makes the integrated data available for compliance-reporting and analytical purposes. It has enabled fast, cost-effective data delivery while enabling data analysts to add any number of data sources for ad-hoc analysis and to easily build new products. SpareBank1 can now perform real-time verification for new customer registrants and is also supporting other processes like Solvency II and IFRS reporting.

Compliance is an issue not set to go away anytime soon. In fact, its role is only likely to increase as law catches up with technological advancements. Whilst the regulatory landscape is unpredictable, the best way for those operating in the FS sector to ensure future compliance, is to get a handle on their data. By providing total visibility, data virtualization can enable FS organisations to take back control and win the war for compliance.

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