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Post-Covid-19: How banks can protect themselves with data
The key is making data completely digitized in terms of powering decision making tools
15 Jun 2020 | Neil Thomas

THERE is no doubt that Covid-19 has ushered in momentous global behavioural change. But as governments across the world continue to deal with the fallout from this pandemic, they will probably also consider what to do once the impact subsides. There are of course many indirect results of this, one of which is how movements of goods, services and capital might evolve.

As governments look, for instance, to use sanctions to ensure global supply chains are protected and ensuring food quality and safe practices, the financial world will also look more closely at where data comes from to ensure they protect themselves from the risk of acting on outdated information that could leave them in breach of various global sanctions. When information in the market is outdated, it becomes increasingly essential that banks can see exactly where the information has been, before undertaking the shaping, integration and co-mingling of that information.

The key to this is making data completely digitized in terms of powering decision-making tools. Data needs to arrive in a format tailored to firms’ needs for it to be integrated into effective decision-making tools. From greater provenance and data lineage, the industry as a whole will drive standards forwards. If governments will be utilizing sanctions to effect behavioural change and ensure food quality standards are upheld across the globe, even more great is the need for best practice in data quality to ensure financial firms remain on the front foot.

For Asian banks, this is even more critical. The region has developed and globalized so rapidly over the past few decades that compliance has become more and more of a challenge. While monitoring outgoing transactions might be manageable, it can be more difficult to maintain oversight of incoming transactions that could be originating from any number of sources. Our Sanctioned Securities Monitoring Service, which monitors close to 25,000 movements a week, shows how easy it is for dangerous transactions to slip through the cracks. Firms may accidentally find themselves trading with sanctioned entities and breaching international sanctions.

As sanctioned entities become increasingly intelligent, hiding themselves behind complex structures, it is critical for firms to be aware of not just the individual terrorist or oligarch on the global sanctions list, but of all companies and financial instruments controlled by, owned by, or even connected to them.

While these may not be named on the sanctions lists themselves, interacting with them could result in significant fines for the banks involved. To avoid this, banks must effectively source data and ensure that they have streamlined and efficient procedures in place for tracking changes in the status of affected instruments, setting themselves up to be compliant.

The potential to succumb to such danger can be even greater in the current environment where teams are fragmented and working from multiple locations. In order to ensure good governance and data processing are compliant and operationally efficient, effective monitoring tools that address the risks present in the on-boarding process, monitoring for changes through the relationship, including shifts in ownership and the sudden lifting of sanctions, are necessary.

As the coronavirus has brought about unprecedented levels of behavioural change in nearly every aspect of life, it is certain the world will be different once life returns to normal. Banks across Asia will effect a change of their own, ensuring best practice of data quality to be compliant in a world where international sanctions will only increase in importance and have a greater impact on their operations. In doing so, they will ensure that they not only have the ability to look into the future, but also the resources to act upon what they see.

Neil Thomas is head of Asia at SIX, a financial services provider that operates the Swiss Stock Exchange and the stock exchange in Spain (BME), as well as the corresponding post-trading business, the Swiss interbank clearing system and financial information business.

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