Financial Crime

Via Trade Finance Global (TFG)

In April 2022, BAFT named Deepa Sinha as its new Vice President of Payments and Financial Crime. TFG’s Deepesh Patel interviewed Sinha to learn what led her to the association, her view on fighting financial crime, and her insights into the progress made in the payments space.

About Deepa Sinha

Deepa Sinha has been in the finance and treasury space for more than 25 years now, in both corporate and bank settings, accumulating a perspective on what’s needed from both.

During that time, she has worked for large banks such as Capital One and been on the advisory councils for J.P. Morgan, Wells Fargo, Bank of America, and Citi.

She also spent some time working for large corporates like the Carlyle Group and Caliburn International (now Acuity International), as well as non-profits like AARP.

Much of her experience lies with the implementation of treasury management systems and enterprise resource planning systems integrations, leading internal IT and business teams, and working with various internal and external stakeholders to build consensus and accomplish objectives.

PATEL: What led you to join BAFT and head up payments and financial crime?

SINHA: BAFT is the organization that international banks active in transaction banking look to for industry best practices, solutions, advocacy, policymaking, and knowledge-sharing.

I have been in the finance and treasury space for more than 25 years now and BAFT will provide me with an opportunity to fill an advisory role to our members on not only what their clients are looking for, but what is developing in the space, and how it can affect them and their business.

As technology advances and various international policies and regulations evolve, BAFT offers the knowledge and capabilities in this space to be ahead of those evolutions and advancements.

That’s why I wanted to join BAFT.

Fraud and Financial Crime

PATEL: What has been the impact of the pandemic on financial crime?

SINHA: The pandemic has been a time for both challenges and opportunities, with regard to financial crime, and associated regulatory compliance.

If we look at the data behind financial crime patterns, there is an uptick in cybercrime, which corresponds to an increase in electronic commerce and payments. The efficiency of newer payment methods presents an opportunity and a challenge for banks, regulators, and organizations like BAFT to strengthen regulatory compliance.

There is much work to be done, but the incredible team at BAFT is positioned well and has the ability to work closely with our members, partners, and policymakers in continually striving for success in these areas. 

PATEL: The trade industry has suffered some serious fallbacks due to fraudsters and issues around money laundering. Do you expect to see this increase moving forwards?

SINHA: We see trade-based money laundering and fraud as two distinct problems that require different solutions.

In most instances, trade-based money laundering is separate from trade financing and takes advance of fragmentation in the value and payment chains. Banks alone cannot solve this – it requires collaboration with customs, shipping companies and other stakeholders. Banks are using artificial intelligence and other tools to get better at mitigating money laundering, but it remains a stubborn problem.

As payments get faster and more frictionless, the risk increases. Fraud, however, is heavily driven by paper-based processes and we are seeing improvements in mitigating fraud as technology solutions are increasingly implemented.

As digital identity becomes more widespread, and duplicate financing solutions gain more traction, fraud mitigation will improve even further. However, we know that criminals constantly find new ways to evade the law, so we have to remain diligent. 

PATEL: Although within the industry there is a general consensus that regulation, reporting on and fighting financial crime are important, it’s also time-consuming, costly, and potentially at the cost of serving smaller MSMEs. How do we tread the line?

SINHA: As in everything, balance is the key. In order to protect assets and interests, and prevent financial crime, regulations, compliance, and due diligence are quite necessary.

However, in finding that balance, we also want to make sure that those same regulations, compliance, and due diligence responsibilities are not overwhelming, especially for smaller and medium-sized companies.

There still has to be some collaborative work between banks and regulators to fine-tune the “risk-based approach” to compliance. BAFT is committed to working with our international banks to understand and lessen the challenges associated with compliance, and also working with regulators to advise how ineffective regulations pose a hindrance to conducting business and actually increase overall risk. 

Progress in the Payments Space

PATEL: Has the pandemic accelerated the need for FIs to speed up and innovate in the payments space (real-time 24-7-365)?

SINHA: Not only did the pandemic accelerate the need for financial institutions to speed up innovation in the payments space, but it also accelerated the deployment of innovative solutions and adoption by corporate clients. 

Across the board, the name of the game is digitization. How we interact with the world as a populace is primarily online now, from shopping to groceries to paying our bills and both the banks and the clients they serve have responded accordingly.

With the advent of real-time payments from customer to customer, now business to business and between businesses and their customers, we are seeing an acceleration of the real-time-payment revolution.

Various markets in Asia were early adopters followed by Europe, but we’ve seen an acceleration in Latin American and North America on the domestic level. The next major innovations will be in real-time cross border payments.

PATEL: Where is the payments space in terms of adopting best practices and standards?

SINHA: Some elements of best practices – such as straight-through rates, payment times, reporting, and digital deployment, offer competitive advantages, so firms are constantly driving towards what they believe is best practice.

At BAFT, we focus more on standards and best practices for functions that are common and necessary for a healthier ecosystem, such as interbank transactions and risk management.

In that regard, our members are very active in collaborating through our committees and working groups. The community is very engaged in driving towards new standards such as ISO 20022 and working with providers such as SWIFT and other payment service providers that offer technology solutions that improve on current practices.

The Road Ahead for BAFT

PATEL: What are your missions and objectives at BAFT over the coming months?

SINHA: First on my list, as well as an ongoing goal, is to be at the forefront of new payments capabilities as they develop, as well as the policies and regulations that guide them, and be able to disseminate that to our members as quickly as possible.

My goal is to assist our members in achieving optimum productivity by leveraging technology and industry best practices in operational efficiency.

I also want to entrench myself as a subject matter expert on the challenges that our members are facing in the area of financial crimes, policies and regulations that govern them, and how to tackle those challenges head-on, with new developments and solutions in technology to prevent financial crimes before they happen, and to solve for them when they do.