When Bernie Madoff was arrested in December 2008 for running a massive Ponzi scheme that snared nearly 40,000 people, leading to an estimated total loss of approximately $65 billion USD, Sameer Malhotra was three months into a new role as Managing Director at Deutsche Bank Group. Mr. Malhotra previously worked in senior client service and operational capacities at GE Capital International Services and Sitel (DELL programs), and he most recently served as Senior Vice President at WNS (Travelocity programs), where his leadership oversight included Fraud Operations. In his broad new position, which included serving as Head of Global Operations for Corporate and Investment Banking (CIB) Client Onboarding, focused on Anti-Money Laundering and Know Your Customer (KYC) risk management, he supervised account management for more than 40 banking Hubs, branches, and global in-house locations across India and Asia, directing a team of 1,000 plus over 300 vendor partners.
Mr. Malhotra, already a recognized expert in financial crime prevention and operational transformation, knew the root of the problem, which made it possible for Madoff to execute the largest Ponzi scheme in history. He says, "Like many global banks, the U.S. banks impacted by the Madoff fraud case were not able to effectively connect the dots between Madoff's various accounts held across the bank. It is quite common for banking clients, particularly for clients of a financial institution's Private Bank, to have multiple client relationships within the institution. Multiple touchpoints mean that a client is being serviced by multiple different banking teams, each profiling the client for KYC due diligence. This results in a completely fractured view of the client across the bank. The duplicative process leads to a poor experience for clients who have to repeatedly provide the same information, as well as a poor use of resources. Most critically, regulators are extremely sensitive to multiple profiles of the same client across the bank, as this creates a high potential for fraud to be committed in one part of the bank that is unknown to other parts within the same financial institution."
Over the next six years, while continuing to oversee AML/KYC, Client Management, and Business Relationship Management functions, Mr. Malhotra contributed to the bank's global change management initiative by re-platforming strategic applications and building an end-to-end "client" architecture, resulting in a 40 percent reduction in time to market for new clients onboarding. In late 2014, he took on a similar role at JPMorgan Chase, with expanded responsibilities, including regulatory compliance and remediations for AML/KYC client onboarding operations in 14 Asia-Pacific countries.
Specializing in financial crime risk prevention and management and solution design at leading global banks for more than a decade gave Mr. Malhotra unique insight into the type of change management that he thought the industry needed. He says, "I was seeking to create a global solution. In 2017 I launched the first-ever initiative across the U.S. banking industry to set up and operationalize a holistic view of a client operating model encompassing all parts of the bank."
At the time that he embarked on this initiative, no other bank had been able to create a holistic view of client relationships. Throughout his career, Mr. Malhotra, who has an MBA from the Birla Institute of Management Technology (BIMTECH), has leveraged his academic background in economics, marketing, and finance and his fraud prevention expertise, by partnering with technology and operational teams to develop innovative solutions to process problems. Based on this experience and collaboration, he was able to design, implement, and operationalize a wholly original operating model that was successfully presented to U.S. banking regulators. The proven approach, known as the Global Banking Client Relationships Holistic View, inspired other banks to follow the model, which Mr. Malhotra believes has played a positive role in reducing money laundering and financial fraud.
That success also led Mr. Malhotra in 2019 to build on the strong foundation established with the holistic view by spearheading a first-ever, enterprise-wide AML and KYC transformation. This included the strategic design and rollout of a client-centric, regulatory, and efficiency compliance solution known as the KYC Reliance Operating Model. Working with leaders across various teams, including Global Asset, Wealth Management, Compliance, Business Initiative Leads, Corporate Investment and Banking Operations, Controls, Privacy, Technology, and Project Management, he utilized a "Design Thinking" methodology to overcome obstacles and get everyone working towards the same holistic goal.
Mr. Malhotra says that building and implementing the KYC Reliance Operating Model required the creation of a centralized team to quarterback the bank's large lines of business (LOBs) to ensure that client data flowed smoothly and that each of the teams fulfilled their respective responsibilities while executing well-structured governance and tracking and reporting performance against Service Level Agreements (SLA's). Together, the aggregate team also worked to overcome complex technical challenges, such as LOBs operating on different technology platforms.
"For both the Holistic View and KYC Reliance Operating Models, the core concept was that one part of the bank should be able to rely on the due diligence conducted by another part of the bank, and only conduct any additional requirements to fulfill product due diligence and country-specific requirements outside of the U.S. This was facilitated by centralizing a client's profiling and KYC due diligence into one view across the bank, with every part of the bank contributing its responsibilities, which then allowed the retail bank to rely on the consolidated due diligence," says Mr. Malhotra.
Mr. Malhotra, who joined a global "top 20" bank as a Managing Director in June 2024, has in the past created an AML/KYC Center of Excellence bank-wide, utilizing the Holistic View and KYC Operating Models in client onboarding to facilitate his work in transaction monitoring, customer and payment screening, client reference data, and Quality Assurance. Leading Operations and Technology teams across India, he has introduced new Artificial Intelligence (AI) and Machine Learning (ML) technologies into the KYC Due Diligence Process.
"AI allows us to automate processes that previously required analysts to manually read through hundreds of pages of company reports to weed out relevant information for KYC due diligence," he says. "Using AI and ML is more efficient and more accurate, and frees the analysts to focus on more complex risk evaluation. We can also use AI to produce an executive risk summary, which is essential for high risk client relationships."
In addition to AI tools, Mr. Malhotra says that using the cloud for data storage, analysis, extraction, and destruction is a cost-saving and more effective way to manage the vast data sets collected during the client lifecycle and after to meet record retention requirements. He adds, "By superimposing analytics tools on top of the data warehouse, we can efficiently run various analyses that ultimately protect the client and the financial institution—and even the global economy—from the risks associated with money laundering."
The significant efficiency and financial gains derived from reducing repetition in the KYC due diligence process have resulted in banks achieving millions of dollars in savings. Creating one client profile used bank-wide has also greatly improved the client experience. The unified view achieved with the Holistic View and KYC Reliance Operating Models also addresses a key focus area of reform for banking regulators in their efforts to reduce money laundering and related financial crimes. For all of these reasons, these innovative systems have been recognized as industry-leading game-changers that are being used in global financial crime operations at banks worldwide.
Mr. Malhotra says, "Although many banks are still challenged to develop their own operating models, the obvious benefits of the holistic view are inspiring banks around the globe to consider their own implementations. The Holistic View and KYC Reliance Operating Model initiatives have fundamentally changed how AML programs across the financial services industry will be designed. We can expect that new implementations integrating AI and emerging technologies will continue to improve, creating a stronger line of defense against those bad actors who would perpetrate financial fraud."
