Banking Blog

Finance Blogs » Banking Blog » Banks need to up their tech game

Banks need to up their tech game

By Marcie Geffner ·
Wednesday, November 20, 2013
Posted: 3 pm ET

Technology presents both risks and opportunities for banks, judging by the remarks of Thomas J. Curry, U.S. comptroller of the currency, who spoke recently at a money-laundering enforcement conference sponsored by the American Bankers Association and American Bar Association, industry groups that represent bankers and lawyers, respectively.

Inadequate technology has been a factor in some banks' failure to comply with the Bank Secrecy Act, which requires banks to help the federal government fight money laundering. The term "money laundering" refers to the use of illegal means to hide ill-gotten gains.

"When we review these failures, we find a number of common threads, including the strength of the institution's technology and monitoring processes, and the effectiveness of its risk management. ... While I am by no means unmindful of the cost and complexity of BSA compliance, I have to say that I find that disappointing. Information technology is crucial to almost every aspect of a financial institution's success, and these systems need to evolve as risks grow and change," Curry said.

Technology also has enabled the invention of alternative payment systems like PayPal, which can be used to make electronic person-to-person payments, and prepaid cards, which can be used to receive payments, pay bills and store money. These products exist to some extent outside the traditional banking system, and that presents new difficulties in anti-money-laundering compliance and enforcement, Curry said.

"How do we track illicit money when it can be quickly and easily moved throughout the world, with nothing more than a cellphone?" he asked.

The question isn't easy to answer, though Curry suggested more technology could be part of the solution.

"The same technologies that can be exploited for illicit purposes can also be employed to combat money laundering, terrorist financing and other forms of illicit activity," he said. "Perhaps the time has come to explore these sources of technology as a means of providing more accurate, timely and better information to law enforcement and regulators, and to reduce the significant costs and burdens imposed on banks and other financial institutions. ... The challenges are growing along with the risks, and it will take all of our efforts -- as well as all of the resources we can beg, borrow or buy -- to keep up."

Technology also can enable banks to develop their own innovative products that they can offer to consumers within the traditional banking system.

"These types of innovations add to consumer convenience," Curry said. "Financial institutions that want to remain competitive will find it necessary to offer products that take advantage of new technology."

Has your bank made major changes to keep up new banking technologies?

Follow me on Twitter: @marciegeff.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.