By Elizabeth Hearst
The head of financial crime prevention at one of the largest Nordic banks has said it will be cutting compliance jobs, as a result of the “huge number of people” hired during 2016 and 2017 labelling it as “simply too expensive”.
In an interview with Bloomberg, Mikael Bjertrup forecast significant cuts to the compliance sector in banking. With over 1,500 staff employed at Nordea Bank Apb in compliance, the long-term impact of these cuts leads him to believe that increasing reliance on automation will improve the quality of work in the long run.
As a result of global money-laundering scandals, banks were eager to invest big in internal compliance, with many financial institutions hiring more than ten times the amount of staff.
Earlier this month, controversial Danske Bank A/S predicted “significant” cuts ahead, with estimates of 1000 jobs to be cut. Following on from the 2017 Estonian Danske Bank scandal, financial institutions were keen to spend big on compliance.
Sujata Dasgupta, a Stockholm-based expert on financial crime compliance at Tata Consultancy Services Ltd described the panic, and said: “After the scandals the banks rushed to add people, since they couldn’t change technology overnight. The simplest way is adding more people”. Dasgupta warns that this reliance is set to change, and added, “there will be a rebalancing of labour: you might not need so many people in the first line, and there’s scope for automation”.
In the wake of Covid-19, banks are scrambling to cut costs with analysts predicting the area of compliance will be an obvious choice for cuts. Banks across the UK, Germany, France, Italy and the Netherlands currently splash out $136.5 Billion on financial crime compliance annually. This figure represents a 60% increase in funding up from $85 Billion in 2017.
Philip Richards, senior analyst at Bloomberg Intelligence believes that “reversing the compliance-cost burden of the banks in the aftermath of the money-laundering scandal is likely to be key”.
He details the current anti-money laundering procedures in which he says billions of transactions raise millions of alerts, which are then investigated predominantly by people, he added, “Over time, we will get to a situation where computers handle 80% of the work and people 20%, but that will take several years”.
Dasgupta highlighted the emergence of a new compliance role, with many Nordic banks shifting manual detection to countries such as Estonia and Poland, she said: “There’s a new set of roles that has come up, which wasn’t there five years ago… There’s also a need for people who can train these models and fine-tune these algorithms. This is the new role that is emerging”.
Although the new roles are “certainly helping banks”, with faster processing times and more finely tuned detection results, she warned that the sector is still far from perfect and added, “We’re still seeing some scandals coming through, which means there must be something wrong with the processes. Technology alone cannot help reducing the scandals, it has to be streamlined processes also.”
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