As the banking industry begins to face up to what must be done to clean up the industry in the full glare of the ongoing Royal Commission, there is little doubt banks must look for ways to proactively identify risk in all aspects of their business.
The Australian banking industry is facing regulatory, financial and reputational problems on a massive scale: the news coming out of the Royal Commission into banks daily lifts the skirts of an industry that has barely paid lip-service to regulatory compliance. This puts in shocking context money-laundering scandals and other fraudulent activities that have already been brought to light.
If anyone suspected the big banks of putting profit before customers — and before their own regulatory requirements — testimony given by some of the major banks’ own employees in public hearings has put that beyond doubt.
Shady practices and toxic structures
On Monday, one of the big four Australian banks admitted nearly 60% of loans approved by the bank were submitted by brokers, with few checks of the financial situation of applicants carried out by the bank.
The bank has now been forced to defend itself against claims it broke responsible lending laws under the National Credit Act, for failing to verify the financial situation of customers who have applied for a home loan.
Last week, another of the big four said volume-based and trailing commissions it pays mortgage brokers can incentivise them to sell risky mortgages, but it won’t stop the practice until other banks also stop.
Then there was the case of the bank that admitted to offering repeated credit card limit increases to a problem gambler who begged it to stop, made it difficult for the customer to close the account, and after two complaints put the customer in touch with its financial assistance team — but then continued to send letters demanding payment.
In April last year that bank changed its practices so it no longer offers credit card limit increases to customers who are spending large amounts of credit on gambling activity.
It has been argued that privatisation, deregulation and self-regulation have created a toxic organisational set-up in the banking industry which encourages criminal activity and widespread fraud to be perpetrated by the banks themselves.
Using technology to encourage real-time compliance
Meanwhile, in many banks, compliance remains an audit function that relies on random sampling to pick up discrepancies or breaches during website inspections or file reviews. This is while the volume of material that needs to be reviewed is growing at an exponential rate.
But artificial intelligence and machine learning are changing that: applying a natural language processing algorithm to the task allows every piece of communication to be digitally reviewed.
Imagine if your marketing compliance technology could raise the spectre that your marketing messaging had crossed the line into misleading advertising territory. This could then prompt the banker — or broker — to make corrections to their own work, flagging and ultimately preventing breaches in real time, as they’re delivering advice or producing content across digital and social channels.
If properly employed — along with changes to the structures the Royal Commission is identifying that reward bank staff or their agents for shady practices — this will go a long way towards encouraging a true culture of compliance in the banking industry.
How Simple can ease the marketing compliance burden
Simple’s marketing resource management system allows banks to complete all its marketing work in one place, simplifying the compliance issues facing marketing, legal and risk, and reducing the chance that bank executives could be taken to task over misleading marketing messaging.
It also establishes an audit trail that makes it easy to track how breaches may have occurred and prevent them from happening again, and automates the approval processes that need to be in place to minimise future problems.
We are also partnering with companies like Red Marker, which are using artificial intelligence to help streamline and reduce daily compliance burdens.
“On the one hand, the community and regulators seem to be demonstrating diminished patience for even some might say modest technical failures,” Red Marker founder Matt Symons said last year.
“On the other hand, the volume of material that needs to be reviewed is growing at a seemingly exponential rate, so we think the compliance and risk function is on a hiding to nothing.”
There has never been a better time for bank marketing teams to ensure they create and encourage a culture of compliance, backed by intelligent marketing workflow and proactive risk management technology.
Simple’s marketing resource management platform helps enterprise marketing teams to plan, review and optimise their marketing activity to ensure brand consistency and regulatory compliance across all touch points. Get in touch or Book a Demo to see how it works.