Nordea, Danske have hired by the hundreds to build compliance. Longer term, those big armies won’t be needed as AI improves, according to Bloomberg.
The two biggest Nordic banks have both recently beefed up their compliance units significantly. Both say the extra headcount is temporary.
Nordea Bank Abp has hundreds of employees who scrutinize billions of transactions in order to catch anything that looks potentially criminal. It’s a costly, inefficient system that Mikael Bjertrup, head of the bank’s financial crime prevention unit, plans to change.
Bjertrup says that about 20% of suspicious alerts are currently closed by algorithms, based on machine learning, with the rest still being handled by humans. He wants to see those numbers reversed so that algorithms handle 80%.
“We’ll be fewer people in the future, but our defense will be better,” he said. “We won’t need as many as 1,500 employees in the future, as technology improves.”
The head of compliance at Danske Bank A/S, Philippe Vollot, also says headcount will probably be scaled back once “technology kicks in.”
With labor accounting for roughly three-quarters of the cost of complying with anti-money laundering requirements, Nordic banks are figuring out how to replace people with artificial intelligence, algorithms and automated customer screening. They say a key frustration now is that the authorities are struggling to keep up, after banks plowed huge amounts of money into their risk controls.
The focus is on finding ways to become more efficient. Bjertrup said his team of about 1,000 people has to wade through the billions of transactions done each year in a process that, for the industry as a whole, is “extremely inefficient.”
Vollot started as Danske’s head of compliance late last year. A veteran in the battle against financial crime, Vollot has held similar positions at Deutsche Bank AG and Barclays Plc. He says the process that Danske and other Nordic banks are going through is typical of the cycle.
“Every single bank that I am aware of, and that got into trouble, had to invest massively, build transformation-remediation programs, address weaknesses, and got there slowly but surely,” Vollot said. “It is a very big undertaking for a bank.”
Banks in five of Europe’s biggest financial markets spent more than $85 billion annually on complying with anti-money laundering compliance, according to a 2017 report by LexisNexis Risk Solutions. Just 26% of that was on technology; the rest was labor. (The service provider is updating its figures this year.)
Vollot has been given free rein to hire, for now. He says experience shows that “you always go through a point where you need actually to add a lot of resources because you don’t have yet the technology to support you.”
But eventually, “technology kicks in and you benefit from proper systems, algorithms, scenarios, case management platforms and ultimately artificial intelligence and robotic,” he said. “And usually this is the phase where you start to reduce the number of people you need.”
„Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”