Ensuring Best Outcomes in AML Risk Management: Napier

hello and welcome to the regulation asia awards for excellence video series my name is manesh samtani i'm editor at regulation asia back in december we hosted our 2020 awards ceremony and in one of our highest profile categories aml ctf compliance the winner for best solution was napier for what one of our judges called a new gold standard for aml solutions so today i'm delighted to welcome three of napier's key executives to help us understand more about the company and

how it's been achieving success in helping to bolster financial industry efforts to combat crime first we have luca primorano napier's chief strategy officer who will be able to talk to us about the company's strategy as well as key technology elements that drive performance welcome luca hi everybody and thanks next we have greg watson who is chief operating officer at napier and whose passion is around client life cycle management and perpetual kyc welcome greg

thanks uh thanks for hosting and finally we have robin lee head of aipac for napier who can talk to us about some of the initiatives the company has in apac as well as future plans welcome robin hi manesh thanks for having us and it's great to be here you're welcome so i guess first off congratulations to all of you once again on last year's award i i'd like to kick off maybe by asking robin to set the scene by maybe talking about some of the more notable financial crime risks and

trends you've seen this year focusing on aipac i guess the the elephant in the room is covid and as a result of coverage you have covet related vin crime so this includes financial crimes that involve on one hand hand sanitizers we see an increase in phone scams and different and and also like cyber related crimes as well i'd say a second um trend that we've seen is definitely the refocus on counter-terrorism financing

especially with everything that's happening in in afghanistan as of late and last but not least i would say that we are we are seeing the intersection of esg with financial crime with the emergence of green crime or more of a focus on on green crime it's actually been around for a while but specifically i'm talking about wildlife trafficking forestry crime and pollution crime thanks robin um what have you seen has been the main response from apac regulators so far given these risks i

mean we've seen a strengthening of regulations across the region especially in in in light of of fat f standards you know continuously updating shall we say i would say another thing would be the embrace of technology specifically i guess if you look at hkma they put out a lot of regtech papers as of late mes has even gone to the extent of of offering a regtech grant and of course taking it back up to to the the financial action task force a

new technologies paper was released recently as well thank you robin i'd like to shift to greg for a minute greg kyc i think seems to continue to cause issues for financial services firms i'd like to hear your view of the challenges what do you think is the way forward to changing this dynamic i mean i think that at the moment there is quite a difference between retail and wholesale kyc and in you know kyc it at both an onboarding of new customers and right through to a maintenance

thereof and i think covert has accelerated particularly in asia i think uh and relevant to the asian market has accelerated digitization as you're you'll well uh well appreciate and that's moved a number of uh organizations financial services organizations who were probably quite stuck in the past about physical presence into much more of a remote virtual experience which i do think has helped the kyc friction and that friction is still quite intense

so i i would expect that you know again that divide is increasing between the retail experience you know your apple type experience which is all pretty seamless and quick to something in the wholesale side of business which is more complex when there is a you know much more intricate entity structures where there's still an enormous amount of friction and i think the problem that you have now is even though the technology exists to solve for some of this it's still pretty laborious and so i think the challenge is how do you take out the manual nature of kyc

and make it much more automated so i think the way forward on this is to move to much more straight through processing and humans by exception and actually you know something that luca is very passionate about i think this is where machine learning can actually aid in that to take out some of that friction could you talk to us a bit about how napier specifically is is helping clients and i guess the industry at large solved some of these challenges we believe that there is a huge amount of noise in the system you know we believe the first wave of technology has been you know relatively successful but

as i've just said that it's created a very manual effort and huge amounts of people and also a lot of error which results in challenges in terms of the risk framework but also that the client experience is still pretty clunky so what we would aspire to be able to provide to the industry is something that takes out a lot of that manual work and if you can imagine a pyramid you know we believe that uh maybe 80 percent of that pyramid would be classed as noise in the system which we

think we can automate out so we're looking at solutions bringing to market solutions that enable a framework to exist that effectively hovers up data around the entity changes an entity and changes in transactional behavior that can then manage that in a way that allows uh effectively the nirvana state of perpetual kyc to exist so we really like this concept of always listening rather than only listening once every five years or three years to move to

something that's much more real time in nature so our solution plan activity review which we have in the market now is very much enabling organizations to integrate that on top of existing technology in order to provide a framework to get to that state of it always listening real-time type kyc infrastructure luca could you talk a little bit about how napier is using technology to enhance transaction monitoring for the industry first of all um nippy's vision is around simplicity making things simple for our clients

analysts and the anti-money laundering community to do so we have developed multiple components of our transaction monitoring platform which enables analysts change management individuals mlro to change their scenarios their patterns as new threats occur within in the markets if you think about criminals um always change their behaviors and their patterns so what we need to make sure of for the society and for our clients is making sure we give them the tools so

that they can adjust the scenarios the rules that the patterns matching based on these new threats and another component we have developed as part of our transaction monitoring system is machine learning which basically allow our customers to detect threats using algorithms and supervise and unsupervised learning to detect combinations of unusual behaviors so if you think about it it's not just about

implementing technology per se it's about adapting the technology to what the user needs to achieve their mission which is the reduction of false positives i.e making sure that we have a system which is smart enough to allow customers to tweak their scenarios and at the same time implementing technology to spot new threats and new behaviors as they occur i do understand that the napier platform has a few different components i wonder if maybe you want to tell us a bit about

some of those different parts of the napier platform how they make the technology platform unique so first of all napier um has a set of products that we build design and that cover the anti-money laundering life cycle including transaction monitoring risk-based score card transaction screening client screening and the last one which greg mentioned which is client activity review all of these products coexist in our

ecosystem of applications which allow users to manage their processes and risk within their compliance area within the same platform so if you think about it instead of having multiple silos multiple verticals our clients can use a solution which combines different processes in the same space and these solutions all implements you know sandbox for configuration machine learning and so on our latest

solution client activity review has been designed to fill a gap we've seen in the market around the lack of communication between kyc systems and transaction monitoring systems so when you go and review a customer because from a regulatory standpoint you need to review customers on a recurring basis then you can finally make sure that what the customers said they would do actually match that transactional behavior and detect anomaly so that you can potentially change your customer risk or

perform in-depth investigation and all of this is enabled by our platform which combines traditional analytical based rules and scenario which more advanced machine learning robin what have you seen in terms of adoption of the platform in asia pacific what kind of institutions have you been focused on what kind of results are clients telling you that they see to add to what luco's saying the best analogy i can think of when it comes to our solution it's kind of like your phone right like like our ios or android

and form has different apps that sit on it like the modules uh luca mentioned client activity review transaction monitoring client screening so in terms of adoption here at napier we have customers right across the board everything from as far as financial the financial industry industry is concerned your your fintech startups right through to tier one banks we also have corporates who are using our solutions for third-party risk

and so where the focus has been has been i would say is predominantly driven by those regulatory requirements that i mentioned earlier with strong representation from australia hong kong china singapore malaysia thailand and indonesia clients are really embracing those this this digital approach from an operational perspective one example i can share is we have a corporate that's

using us from a third-party risk perspective they've got 10 million business partners that they have to screen on a regular basis and using the power of technology and and and napier they were able to reduce false positives time and cost by 90 in the space of three months the other example i can share is um this concept of holistic aml and what greg was talking about earlier with perpetual kyc whereby uh tier one bank was basically opening

up a whole bunch of different separate apps and as a result of having these those five of them right and five of these different apps each one has its own case management system each one has its own reporting system and they had to do this manually so it averaged about i think 12 hours or so for each each customer report to be generated and and so bringing in client activity review they were able to feed those different bits of um systems data into our platform that the platform that we put

together isn't just a software platform it's a data platform as well so this is really exciting for us here at napier because for the first time financial crime team get their own data set that they can play about with and like i said it's unprecedented and so as a result of leveraging client activity review it enabled them to do three things um number one they were able to do those clients 360 reviews automate that so rather than take 12 hours it's there it's done right because

the data is all being fed into the platform number two they were able to generate insights leveraging the ai platform that a human necessarily wouldn't be able to pick up and just a little thing about those insights managed i mean the challenge that compliance amon and financial crime teams have is they're all they've always been viewed as a cost center business prevention etc etc well now with client activity review and with those insights being able to be generated some of them are actual leads

for new lines of business this is the holy grail for for for anyone who's worked in this space for the past 10 15 years to be able to actually contribute to the business and be a revenue generator it's astounding and last but not least was what craig was speaking earlier to this concept of perpetual kyc where we're always listening and and so if i was to take the example of of manish who's a um traditionally a low risk customer so we

only look at his route his file you know every five years as opposed to three years for the medium risk or or one year for the high risk and then suddenly something drastically changes with manish and maybe he he he marries a princess and that is now politically um exposed or does suddenly does some super large transactions that he normally wouldn't do the system will will automatically flag that and say hey instead of waiting for those five years to look at manish's file you might want to

do that sooner and so this customer has also seen some some astounding results because of that the other thing i want to touch on is this this is term that's been flying around the software industry for a while uh called customer success we are front and center focused on this it's it's a very very important aspect to our organization and this concept of customers success is measured by what we call an nps score a net promoter score and what that is you can think of it as like a a grade out of

10 that's given once a quarter and what we've done at napier is we we've actually put in performance metrics that are aligned to that customer success score so should we see a decline two quarters in a row of that customer success number we get dinged on it and i'm not just talking about the customer success manager themselves i'm talking everyone right through to our ceo within the organization steve jobs said that you've got to start with the customer first and work backwards and that's something that i i

truly believe that we um we practice here at napier question for greg and luca from a technology perspective greg what is your vision for the next 12 to 18 months or so with the napier platform well i think it's it's all about this always listening type concept so intelligent compliance platform to me really is something that's pretty flexible and i think this is where some vendors i think get it wrong so if you go into a smaller organization they

don't really understand necessarily the nuances of having multiple systems and so i think what we would like to provide with our platform is the ability to onboard customers to onboard products for those customers to maintain those customers throughout a due diligence cycle you know being real-time being exception based as much as possible and then to off-board those customers if required or you know closed products were required but all in one all-in-one platform and so having the ability to be modular having the ability to scale in and out

of it um but you know something that i think would be very much a backbone for organizations so you know they may have a front office crm like a sales force we would like to be the the back and middle office backbone of an organization and hopefully those two applications can exist in harmony and talk to each other but that's where i think our vision is going forward maybe luca can add to that um the kind of areas within our roadmaps are split into functional areas as we improve the functionalities of our applications to make sure that there is

further integration between data sources and processes we are going to be focusing on workflow whereby users is proposed the next best thing based on the data that the system has collected to make things faster more efficient and more effective for our analysts and on the other side we have a set of technologies development that combines for example natural language processing to process and structure data and the ability to sift through a significant amount of this unstructured information

to give more data to the analyst and at the same time the ability to integrate all of the machine learning models that the users are deploying in a dynamic way so that the models are optimized to improve the outcome for the end user using for example active learning to make sure that the machine learns the best outcome based on the historical review so if you look in the next 24 months what you will see is an increase integration within our

ecosystem bringing in more data from the kyc world and at the same time you will see several additional what we call widgets that are developed using machine learning that help users solve specific problems such as false positives within screenings or such as the ability to combine multiple results from multiple investigation and so on so i hear increased integration more data and more problem solving those all sound

like great things and i look forward to hearing more about um and with that we are out of time i do want to thank you luca greg and robin for joining me today and sharing some of your work with us of course i do understand your work goes a lot deeper than what we're able to discuss today on a short call but again i do look forward to hearing more about napier's success thanks again thank you thank you for having us thank you

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