Lesson from TD Bank scandal, et al.: Automate monitoring of KRI relevant to managers, employees

Details about TD Bank’s years-long money-laundering extravaganza are jaw-dropping. The legal filings illustrate a stunning embrace of financial crime and a near-complete disinterest in monitoring Key Risk Indicators (KRI) for malfeasance by bank managers and employees.

U.S. federal prosecutors describe how TD Bank made it “convenient” for criminals to open accounts, make massive cash deposits, and engage in other painfully obvious money-laundering activities. In fact, reading the U.S. Justice Department’s recent press release on TD Bank charges and guilty plea makes you wonder if it’s an April Fool’s joke because the conspiratorial behaviors of in-house personnel are so egregious over so long a time as to be nearly unbelievable.

For example, Assistant Attorney General Nicole M. Argentieri noted that “for nearly a decade, TD Bank failed to update its anti-money laundering compliance program to address known risks.?As bank employees acknowledged in internal communications, these failures made the bank an ‘easy target’ for the ‘bad guys.’ These failures also allowed corrupt bank employees to facilitate a criminal network’s laundering of tens of millions of dollars.”

Prioritize automated monitoring to prevent in-house financial crime

That this kind of criminality could infiltrate a major financial institution in an era of rapid advances in RegTech software speaks volumes. Banks that actively choose to prioritize compliance can choose to leverage RegTech solutions to use KRI to monitor employees and managers. And it goes without saying that most decade-old regulatory technology is an open door for criminality in the 2020s.

Internal controls that prevent malfeasance by managers and employees are central to Risk Management in financial institutions. But simply naming the rules is not enough. In-house bad actors will find ways around the internal controls. That’s why institutions need to use their RegTech to monitor the work behaviors of managers and their employees.

TD Bank is just the latest example of in-house malfeasance. The shocking 2016 heist of $100 million from the Central Bank of Bangladesh likely included in-house help. And the similarly high-profile malfeasance at Wells Fargo showed how bank employees abused customers and committed fraud to meet sales targets.

These examples show the level of risk inherent in bad-actor employees and managers. Today’s technology provides a crucial bulwark against this kind of malfeasance by managers and employees. Automated monitoring of in-house KRI will continuously scan for behaviors by employees and managers that are outside the norm. And with agile RegTech systems, the system can notify auditors directly, rather than managers who might be compromised.

Seeing in-house malfeasance result in massive fines and other penalties should be the norm. In this day and age, automated monitoring for KRI—and so many other things—is stunningly easy. Financial institutions simply need to choose to take advantage of these tools.

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