Data Derivatives is a boutique consulting firm focused on implementing, fine tuning, and validating financial crime systems. Regulatory bodies have been raising the expectations for financial institutions financial crime monitoring programs in recent years in addition to the penalties for non-compliance.
Financial institutions by their very nature are extraordinarily complex informational ecosystems and attempting to implement a financial crimes solution within budget and on time can prove to be challenging without the guidance of a seasoned group of professionals. Data derivatives focuses on the following areas within financial crime:
Anti-money laundering (AML) encompasses a wide range of activities and functions for a financial institution and needs to be evaluated in a global context. The three main pillars of AML are know your customer (KYC), transaction monitoring and sanctions screening for Office of Foreign Asset Control (OFAC). KYC can splinter into different activities such as client on-boarding to satisfy an institution's customer identification program (CIP). KYC also includes risk rating a customer which could fall under the customer due diligence (CDD) segment of the financial institution's AML program. Additionally certain customers could present unique risks to a financial institution and these customers may fall within the parameters of enhanced due diligence (EDD).
Fraud is a major concern for many financial institutions in today's world of record breaking data breaches. Criminals or malicious insiders could be obtaining customer or company information to transfer value from the victims to the perpetrators control. There are ways to leverage data to identify red flags in online requests such as calculating the distance between the billing address and the ip address of the incoming request. Employees are also a significant source of risk because of the access they have to sensitive data and their knowledge of internal policies and controls. Hence, monitoring the employees activities and keystrokes in relation to their interaction with customer accounts is vital to mitigate fraudulent transaction risk.
Capital markets are based on the premise that markets are fair and balanced. However, history has showed us time and time again that markets can be manipulated by bad actors who may want to use their position or deep knowledge of trading practices to manipulate price movements or create the appearance of demand for their benefit. Detecting this type of market abuse can be quite difficult without the proper models to filter out of the noise of normal volatility compared to artificial demand.