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Forbis, the maker of the FORPOST financial services platform, recently completed a 15-million-euro project for a core banking system which enabled a pan-Baltic business transformation at Danske Bank. It as a rare example of a major IT transformation project finished on time, on scope and on budget. And with no business disruptions. EY Baltics served as the independent programme consultant.
Accepting the challenge
Many said it could not be done. Forbis took the challenge to commit to the aggressive terms that Danske Bank mandated for building a “Baltic Single Instance” – one IT system for the Nordic bank’s until then separate operations in Estonia, Latvia and Lithuania – and taking it live within 24 months.
“Forbis was the one that accepted the challenge under the conditions we required,” said Darius Jasinskis, Head of Baltic Business Development at Danske Bank. He oversaw the transformation programme for Danske Bank’s Baltic presence, which involved regional integration, alignment of services with a new focus on business customers only, and optimization of IT operations. “It was about the ability to deliver on a new value proposition, going from three banks, three systems and three organizations in the region, to one bank, one system and one organization,” Jasinskis said.
Each Baltic country had quite different product offerings and approaches to IT governance, said Jelena Michailova, Deputy CEO at Forbis, which has been in the business of banking IT systems for more than 20 years. There were complex legacy systems and huge amounts of diverse data to deal with. “Both parties agreed that programme management office, preferably an independent one, with banking competencies should be introduces for successful programme implementation. That role was filled very well by EY Baltic” Michailova said.
She said projects of this scope generally take five years of work or more. Doing it in just two years demanded careful planning and resource management – including a 30 percent increase in Forbis’s staff. It helped that the Forpost system was already in use in all the Baltic countries (including at Danske Bank in Lithuania), so there were no surprises in terms of local specifics. And the Forbis team’s experience with other international projects of this type would also prove to be invaluable.
Three big milestones
The project launched in early 2016. It was decided, logically, to split it into three parts, for the move to the Baltic Single Instance in each country. Lithuania was first, as that migration required the least development. And it provided an early win – a very smooth transition before the end of 2016 and in fact two weeks ahead of schedule. The roll out was managed by Danske Bank’s Command Center, involving key executives in charge of transformation.
Latvia took more effort. On the technical side, significant development work was needed and all the data from the other Forpost version used in Latvia had to be migrated to Baltic Single Instance. From a business perspective, the bank had to change or upgrade its processes and organization in keeping with a regional, pan-Baltic way of working.
One complication was that the change-over date at Danske Bank in Latvia in 2017 coincided with a redenomination of the national currency in Belarus, where the company’s system thus had to be adjusted. “For the amount of work involved, the redenomination of the Belarusian rouble was like the introduction of the euro in each of the Baltic countries. A lot of changes had to all be made, and the same night as the Danske migration in Latvia. Forbis’s support of these two major projects in parallel shows its capacity to handle multiple large-scale international projects,” Forbis’s Deputy CEO noted.
The third, Estonian milestone was the most complex one. That migration was scheduled last, during 2018, in order to leave more time for all the preparations. It, too, was completed, on time, with no major incidents or operational disruptions. Forbis had agreed not to completely freeze the bank’s business development during the project, and to help comply with any regulatory changes.
“The bank promised to inform us as early as possible about new requirements from the financial regulator, and about any planned new products or the like, so we could react right away and plan accordingly. Being so flexible, so agile, without jeopardizing your project is only possible when you have a lot of practical experience, a clear grasp of the big picture and how it will be impacted by one or another change. Theoretical knowledge is not enough,” said Jelena Michailova.
Ready for the future
What exactly did Danske Bank get? “The Baltic Single Instance is one system with a single interface in the local languages for customer and in English for employees at multiple branches in different countries. It has flexible user rights for data management and the same system-wide functionality with customizations for local compliance, and supports instant inter-branch payments 24/7, with standard pricing terms that can be adjusted locally. It’s connected to one data warehouse – as a single source of truth for business intelligence and reporting, and as one system ready to connect to the Danske Bank group’s Business Online system. Now we are working as a regional, Baltic organization with centralized governance, structure and processes.” That’s how Darius Jasinskis describes what is now up and running.
Artūras Piliponis, EY Baltic Advisory Services Partner, summarizes EY Baltic work as PMO in this transformation: “This was not a regular IT system implementation. It was a major IT and business model transformation challenge considering that Danske Bank in the Baltics had to upgrade its technology in Lithuania and Latvia and change technology in Estonia, whilst also changing its operating model and unifying products as well as procedures across the three countries. What is more, all of this happened as planned and in less than 2.5 years. It takes other similar complexity organisations three to five years per country to do something like that.” EY Baltic assisted Danske Bank with programme management, testing management and other quality and technical support aspects of IT solutions implementation.
In fact, Danske Bank in the Baltics is undergoing further transformation related to the Danske Bank Group’s new strategy to concentrate on Nordic customers. That means exiting local business relationships in the Baltics to focus only on Nordic and international customers present in Lithuania, Latvia and Estonia. The new core banking system that Forbis put in place, the Baltic Single Instance, is proving to be essential in supporting the ongoing operational changes in Lithuania, Latvia and Estonia, Jasinskis stressed.
After all, the company’s IT solutions are “designed to be readily adaptable for the future,” she explained, adding that: “The pace of technological and market change is now so fast that you can’t just build systems for today. Successful digital transformation at financial institutions requires understanding both the technologies and the business environment in-depth. We work hard to build that into our integrated and multifunctional solutions.”
There are numerous cases worldwide when criminal groups and individuals sought to legalise dirty money or integrate it into a legal financial system. According to the data of the United Nations Organisation, the amount of money laundered worldwide every year is from USD 800 billion to 2 trillion. These amounts correspond to 2–5 per cent of the global GDP.
Suspicious actions are often overlooked
Experts of the “Fortytwo Data” company of anti-money laundering solutions in Great Britain have determined that within the last decade 18 out of 20 biggest banks in Europe were subject to penalties for breaching anti-money laundering regulations. Thus, the belief that the majority of these cases occur at the financial institutions in developing countries, where control is weaker, is wrong.
Birutė Žalalienė, the specialist at the “Forbis” company organising anti-money laundering training for representatives of financial institutions, states that money laundering and other financial crimes is one of the biggest threats that financial institutions currently face, and therefore they must appropriately prepare to protect themselves and their customers.
“Banks and other financial institutions often simply fail to ensure that anti-money laundering measures are complied with due to the lack of competence of their employees. Of course, this does not exempt them from responsibility, and therefore financial institutions should devote sufficient resources for the prevention of illegal cash transactions, should use specific technical measures and constantly train employees”, says the anti-money laundering specialist and reminds us that anti-money laundering requirements for financial institutions are becoming stricter in the European Union every year.
FinTech innovations are useful for the prevention of money laundering
The European Commission has recently adopted the 5th Anti-Money Laundering directive that provides for the closer cooperation of controlling institutions in different countries, by focusing on virtual currencies and new safeguards for transactions from higher risk third countries.
Žalalienė claims that the focus on anti-money laundering is also increased due to innovations in the field of financial technologies.
“Opening the financial service market to new participants in many cases is useful for consumers who are able to use financial services more conveniently and at more competitive prices. However, supervisory institutions have more work as a result. They must ensure that payment companies operate smoothly and avoid turning into a tool for individuals and organisations involved in money laundering”, Žalalienė tells.
Advises to take a closer look at laws
According to Žalalienė, new technologies make it possible to ensure the security and transparency of financial transactions, but the problem is that new market participants have significantly less experience in the field of anti-money laundering than traditional banks.
“For this reason they are facing a risk of becoming a target for individuals or organisations that are interested in money laundering and, at the same time, the focus of controlling institutions. For this reason not only the banks operating in Lithuania, but also financial companies and start-ups should familiarise themselves with laws on Anti-money laundering and terrorist financing applicable in the country, resolutions of the Bank of Lithuania and EU legal acts regulating this field”, says the anti-money laundering specialist.
Žalalienė also distinguishes the most important obligations related to anti-money laundering that apply to every financial market participant.
“These include performance of appropriate customer check and registration and monitoring of transactions, and contracts performed by customers. It is necessary to constantly check whether transactions performed by customers do not contain characteristics of suspicious activities, ensure the implementation of international sanctions. Moreover, it is necessary to report information on suspicious transactions to the Financial Crime Investigation Service (FNTT), continuously perform personnel training in the field of anti-money laundering and to officially appoint a person—an executive—who would organise the performance of prevention measures”, lists Žalalienė.