Risk management in the client digital lifecycle experience: helping to make sanctions work

The intent within the sanctions program has introduced for the first time the type of targeting of individuals and entities that draws on big data, relational science, and artificial intelligence.


It could be argued that the economic and monetary sanctions imposed on Russia have been the most successful single thing that Ukraine’s allies have done to damage Putin’s war efforts.  They have not only sought to entirely bar Russia from participating in the world’s financial system but have also taught to totally isolate the regime from all sources of foreign currency.

Not only have these efforts have been achieved with a global solidarity never witnessed before, but with a breathtaking speed of execution compared to previous efforts. I can only imagine that this has come to as a great surprise to the Russians, who normally face a lot of rhetoric and cajoling but little single-minded coordination and execution.

The intent within the sanctions program has also introduced for the first time the type of targeting of individuals and entities that draws on big data, relational science, and artificial intelligence. 

This approach has not only identified the main actors in the banking and political system, but also a host of indirect actors who benefit from connections to the regime.  This approach has allowed the allies to swiftly create a far larger and extensive spider’s web of deceit, and to close many more back door exit plans those individuals and businesses may have thought would be open to them to continue to operate in the shadows.

The sanction program only works, and continues to work, with the support of financial institutions around the globe. These institutions are making every effort to not only prevent “bad actors” getting into the system, but also ensuring that those “stuck” inside cannot get their own and other’s capital and financial assets out.   The huge upgrade that many organisations have introduced in scalable transaction monitoring to detect and prevent financial crime is one of the chief tools helping to ensure that the intent of the full weight of the sanctions becomes a reality.  New solutions in this space are not only able to detect attempted intrusions more quickly, but also to block them more effectively and will less need for human confirmation.

Simultaneously, financial institutions are continuing to evolve and harden their investment in digital client lifecycle risk management, an area of prime focus for us at Wealth Dynamix.

If one digs into exactly what this means, as guided by the work of the Wolfberg Group, 3 areas come into focus:

  1. expanding the concepts of identification and verification in authentication by introducing a broader behavioural and demographic footprint to accompany different types of biometric methods of authentication of individuals and documents,
  2. expanding the attributes of the client’s risk profile into one that is holistic and dynamic, rather than static and narrowly defined.  This brings the on-going activities of individuals and entities into scope and defines the client vis a vis their associated extended network of collaborators,
  3. expanding the notion of client management to comply with a risk framework built on a ‘trigger event’ approach rather than based on a scheduled periodic review process.  This means acquiring the ability to apply a targeted and disciplined approach to due diligence in real-time.

In thinking about what these recommendations mean in practical terms for us, a software provider of client lifecycle solutions, we have recognised that for the past three years, our private banking and universal bank wealth clients, as they have been evolving from brick and mortar activities to digital cloud based ones have always been doing so with a careful eye on security (across a myriad of dimensions) and safety (based on the risk in the activity to themselves and their clients). More often than not, they have been choosing to introduce digital life cycle journeys which emphasise:

  1. Simplicity in client effort & design
  2. Speed in the prospecting to conversion journey
  3. Smart workflows which align risk to the on-boarded situation

This thinking has introduced a lot of wonderful and innovative things into the client experience, and greatly reduced the time and effort that it often takes to initiate a product (and by extension profit) conversation. However, we believe that any CLM approach that places too much emphasis on just these 3 dimensions (the “sexy bits”)

  1. may well lack an underlying client data model that can easily be extended and introduced that broadens the set of client attributes used for authentication and verification thereby preventing unauthorised account takeover, and 3rd party social engineering efforts,
  2. could end up imbalanced when it comes to prospecting/on-boarding capabilities versus client management. Client management provides the means for organisations to introduce new workflows, and business rules that can respond to trigger events, and alert Relationship and Risk Managers of changes to an individual’s risk profile
  3. may well be unable to support the real-time change management requirements of a dynamic trigger-based approach.  Flexible decision engines coupled with a lo code/no code internal user experience make it possible to turn good intentions into great compliance.  They also enable firms to continuous refine and deploy client risk scorecards that can quickly reflect new relationships and changes to a client’s operating network.
  4. Is likely to struggle with client types that can only be served through a more complex authentication, verification, and on-going management approach. Financial crime is more often than not initiated and perpetuated at a distance, and systems that can not cope as well with both ongoing KYC and KYB requirements inclusive of both primary and indirect relationships will be compromised.

The success of sanctions such as those we are seeing against Russia is strengthened by firms embracing the idea that client digital lifecycle management and client digital lifecycle risk management are one in the same. We are building cloud-based systems here at Wealth Dynamix that recognise that client profiles need to be created and maintained as evolutionary, so that institutions have the ability to safely, securely, and swiftly respond and act. We invite you to come and visit us and see for yourself.

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