Why manual on-book screening is officially a process of the past

As part of AML and KYC, Financial Service Providers have always had a regulatory
obligation to verify the legitimacy of their customers and transactions to detect and
prevent financial crime and fraud. At end of Summer 2024, this responsibility took on a
new tone with the introduction of the FCA’s new Consumer Duty for closed products.

Falling within “Prevention of Financial Crime” guidelines, the Duty requires fraud leaders to evidence a proportionate and risk-based approach to blocking fraud and protecting customers of closed book products, across the full scope of finance and insurance offerings. We explain what that means for your fraud strategy, and how to adapt for the long-term. 

• Vital insights from a year of on-book audits ⇒
• How should you evolve your on-book risk strategy? ⇒
• Compliance, customer lifecycles and the importance of "continuous" ⇒

Vital insights from a year of on-book audits

For many financial service providers, the closed product guidelines validate, rather than re-route, strategic direction. However, following a year of on-book audits in readiness for the new Duty, FSPs have gained vital insight.

Namely that on-book audits are notoriously challenging. And more importantly, that running these audits manually – on an ongoing basis as per regulations – is neither operationally feasible, nor strategically sound in the face of evolving fraud tactics. This is for two reasons:

1. Firstly, the FCA’s closed product updates apply to the entire customer lifecycle. There’s no limit on the need-to-know events that can occur during a customer’s time with you and as such, manual checks present a huge resource burden.
2. And secondly, fraud behaviours are becoming more subtle and prevalent within on-book portfolios as proven by recent findings relating to document fraud and transaction fraud. Therefore, the risk of fraud going unchecked between screening intervals is now higher.

How should you evolve your on-book and closed product risk strategy?

In this new state of play, manually obtaining such deep and broad intelligence is out of the question. FSPs regulated by the FCA are demanding an alternative solution.

One that automates both the closed product and on-book screening process, and continuously gathers information on “as-they-happen” risk events. FSPs have a new option in SONAR – Synectics’ continuous portfolio screening solution

SONAR allows financial services to apply the same due diligence to on-book parties as to new customers by continuously identifying critical events affecting risk.

Crucially, SONAR automates the (in many cases, manual) counter-fraud and fair customer treatment procedures mandated by the FCA. So, not only can FSPs understand when and how risk levels change throughout the customer lifecycle, but they can streamline this process – financially and operationally. 

Compliance, customer lifecycles and the importance of "continuous"

There is zero guarantee that genuine customers will remain as such. Risk levels change constantly - for every customer, at every point in the lifecycle. And with this, the definition of “proportionate” protection measures changes too.

It makes sense then that FSP priorities now turn to embedding lasting practices in relation to the new Consumer Duty and expanding opportunities for automation.

If you need help in this area, you can contact a Synectics Fraud Strategy Consultant on info@synectics-solutions.com