Is “compliance as a competitive differentiator” helpful or harmful?

Is “compliance as a competitive differentiator” helpful or harmful?

compliance as a competitive differentiator
compliance as a competitive differentiator


2 Dec 2022

“Compliance is becoming a competitive differentiator.” This phrase is growing increasingly fashionable within risktech sectors today as a way of trying to articulate the value that having robust anti-money laundering compliance technology in place can bring. It is a well-intentioned statement, but it is incorrect. Worse, its continued use could be damaging to the compliance discipline as a whole.

The most important goal of an AML compliance solution should be helping to ensure that the firm concerned is meeting its regulatory obligations in a particular area. For financial crime solutions, this means efficiently detecting potential and existing customers that the firm should not be doing business with. Technology cannot do the job alone, however. Globally, the compliance discipline has a long history of collaboration and information sharing to support the international mission of stamping out financial crime. None of this is, or should be, about competitive advantage.

The role of customer experience

However, providing the business with a great customer experience can be about competitive advantage. Reducing friction in onboarding, KYC and payments are critical to improving customer experience (CX), which can enhance the firm’s reputation. This can both help to attract new customers and retain existing customers, making the customer experience a very powerful differentiator for financial services firms. So, the secondary goal of good financial crime software should be delivering the elements that support a great CX.

Customer experience is the competitive differentiator here, not compliance.

Why is it important to make this distinction? There is a real risk that if compliance is seen as a “competitive differentiator” among firms, the much-needed collaboration and information sharing among firms will simply dry up. This has happened in other areas in the past – the early days of the operational risk discipline saw unprecedented collaboration among firms, which ended, in part, when op risk teams began to pitch themselves as delivering competitive advantage. The discipline’s progress moved into the slow lane as collaboration collapsed.

Let us not risk the degradation of financial crime prevention collaboration in the pursuit of market share, placing the desire for growth ahead of the regulatory and ethical obligation to combat financial crime.

Best of both worlds

Firms need to work with a financial crime software solution that delivers on regulatory obligations and delivers an improved customer experience. A best-in-class core technology stack that provides low-latency, high-speed screening, and which is capable of massive scale, can process anti-money laundering checks and sanctions screening quickly and efficiently, enabling firms to onboard clients more rapidly than ever before. And because the solution is based on a much more accurate matching engine, false positives are reduced, and compliance requirements are met. ​

The right solution also enables the modelling and testing of the impact of new screening requirements, to improve speed to compliance​. This greatly reduces the risk of delays to customer onboarding when new requirements are announced, while at the same time ensuring that new screening requirements are implemented in such a way that they meet compliance demands.

The financial crime discipline needs to be careful about how it articulates the value that it delivers to organisations. Detecting and preventing financial crime – through meeting compliance obligations – should never be about competitive advantage. Instead, it should be about collaboration. However, the right software can support the regulatory compliance demands and ethical needs in the fight against financial crime, while at the same time providing a superior customer experience through robust technology delivered in the cloud.