Target operating models: the basics
With the aim to ensure programmes continue to mitigate financial crime risks in the face of new challenges, many large financial institutions already have a target operating model in place. However, this shouldn’t just be the preserve of large institutions, it is fundamental for all.
A financial crime target operating model is the vital blueprint that ensures anti-financial crime processes, systems and controls are strategically aligned. It’s responsible for leading the prioritisation and coordination of an entire anti-financial crime programme and ensuring it stays risk-relevant and proportionate.
More practically, a target operating model typically includes the following elements:
Vision: Strategic direction of the company and compliance function, including financial crime risk appetite.
Processes: All the actions taken in financial crime prevention, which are documented in policies, procedures, and desktop manuals. The policy and procedure framework encompasses organisation-wide guidelines for policy and procedure creation, execution, and clear instructions for amendments.
People: How your resources are structured across all financial crime functions and defining the structure of teams, including the three lines of defence. The organisational setup should clarify how different business lines and segments operate with one another. Additionally, team culture, people culture, and learning opportunities must be included alongside resource requirements.
Technology: The systems, applications, and data that support the compliance function. This includes solutions and tools for transaction monitoring, identity verification, customer monitoring, case management, etc.
Governance, reporting and management information: Underlying the target operating model is a governance and management information structure. Tracking the success of a target operating model requires a good governance structure that receives clear management information flows from each area of the target operating model. Ultimately, a target operating model can only be effective with good governance and reporting.