Multibillion-dollar fines for alleged respectively committed financial crimes have become a new material financial risk for financial firms. The average fine has increased seventy-fold in the past six years, rocketing from $22 million in 2008 to nearly $1.6 billion in 2014.
To this end, banks are moving beyond traditional risk management and into the kind of techniques more commonly associated with spy agencies such as the CIA and MI5. They are using advanced analysis of transaction patterns, communications, and social networks to identify potentially criminal or unethical behavior. Banks are also increasing their financial crime risk-fighting resources. However, if the banks hope to be profitable, they had better learn to also be good.
Dominik Kaefer, a principal in Oliver Wyman’s Financial Services practice, discusses why financial crime is the new material risk for banks
The Financial Crime Wave
Banks' financial fines are skyrocketing, increasing cumulatively by nearly 3,000 percent over the past five years