9 essential tips for startups on choosing the best AML software

Startups looking to improve their anti-money laundering (AML) compliance programs will find no shortage of software solutions. The market offers a wide range of options, and each vendor will have its own strengths.  

However, startups face a very different set of challenges to larger businesses. Limited budgets, pressure to grow quickly and onboard new customers, the expectation of total focus on the customer, and the need to move faster than established firms all impact their choice of software. Any solution they use must be highly accurate – to avoid the reputational and regulatory damage of non-compliance – but still affordable, and must not slow down the customer experience or innovation on the product side. Many early-stage ventures find themselves caught between buying a cheap but limited solution and replacing it later, and investing in an enterprise-grade alternative early on to avoid having to revisit the issue in the medium term. 

Startups must take a close look at the various AML software solutions that exist and decide which one best suits their needs. 

The importance of advanced AML software for startups 

In today’s AML compliance landscape, it is no longer enough for financial institutions (FIs) to rely on manual-only processes, which can be slow, labor-intensive, and prone to error. For instance, now that the European Union expects firms to be able to offer and receive instant payments under the SEPA Instant Transfer (ICT) scheme, FIs have to screen transactions faster than ever before. Changes in the financial ecosystem like this make using advanced AML software essential. 

Effective compliance requires firms to collect, process, and analyze vast amounts of customer data – tasks that specialized technology can perform much more efficiently than manual teams. New financial crime typologies are constantly being developed and can often be detected more quickly with the use of machine learning (ML). For startups, the critical consideration is not just using AML solutions to meet the bare minimum of regulatory expectations, but implementing systems that effectively address current needs and can scale with the business. 

9 things for startups to look out for when choosing their AML software 

1. Recognize AML compliance requirements 

While global AML regulations tend to share several key principles in common, notable differences will exist in different countries’ AML legislation. Two common examples include: 

• Sanctions lists: Countries and intergovernmental bodies maintain their own sanctions lists, which are subject to frequent updates. 
• Politically exposed persons (PEPs), and their relatives and close associates (RCAs): Definitions of PEPs and RCAs, and firms’ obligations regarding them, vary. In the UK, for example, domestic PEPs are, assuming there is no conflicting evidence, assumed to be lower-risk than foreign PEPs; meanwhile, the US does not regard domestic officials as PEPs. 

Given that financial criminals are liable to exploit differences in legislation across jurisdictions, startups should ensure their AML solutions can meet their local regulatory obligations. 

2. Define your own business needs 

 A central tenet of AML compliance is that no one-size-fits-all solution works for all organizations and their customers. This is the basis, for example, of the Financial Action Task Force’s (FATF) endorsement of the risk-based approach to AML. Startups should consider their business model and where they are most likely to encounter risk based on the products and services they offer, and the jurisdictions and types of customers they serve. This should inform their policies around the screening and monitoring of customers and transactions they undertake, the data this requires them to collect, and the tools they need to do so. 

Startups should clearly understand their compliance objectives in alignment with wider business objectives, such as maintaining a certain level of growth, onboarding a certain number of customers, reducing onboarding times, or reducing false positives. When choosing a software solution, firms should ensure they can explain – to regulators or auditors, for example – exactly how it helps them meet these goals and why they have taken certain decisions. 

Key metrics of success will always involve: 

• Protecting the firm’s reputation: An association with security and strong compliance is a competitive advantage for FIs – particularly startups where building brand trust is critical. Effective AML software ensures firms stay on top of the latest typologies and risks. 
• Customer experience: AML software, deployed in accordance with an FI’s risk-based approach, should not, within reason, hinder onboarding new customers or allowing them to use a given service. Firms need to find the ‘sweet spot’ where sufficient friction is included to dissuade illegitimate users without making the experience onerous for the vast majority of legitimate customers. 
• Effective internal processes: Intuitive workflows should allow compliance leaders to delegate resources, prioritize the greatest risks, and resolve alerts faster. 
• Continuous improvement and optimization: What success looks like will change as the bank and its financial environment evolve. Compliance leaders should work with their vendors to understand what other FIs are focused on and if there are more effective ways to achieve their financial compliance objectives. 

3. Understand the software’s compliance features  

 When selecting AML software, startups must ensure it aligns with their specific compliance needs. The software should be equipped with robust features that address regulatory requirements and operational demands. Specifically, firms should look for solutions that offer the following key functionalities:

• Customer screening: Against sanctions lists, watch lists, PEPs and RCAs, adverse media, and enforcement data. 
• Ongoing customer monitoring: To capture any changes in their status relating to the above categories. 
• Transaction screening: To identify payments involving any risk factors – such as a payment to a sanctioned individual – and allow firms to report these. 
• Transaction monitoring: To identify patterns in customer payments and flag any that deviate from this. 

When assessing a software’s capability on any of these fronts, more technical considerations are relevant, such as: 

• Data coverage: The ideal solution includes consolidated data from various sources, such as all relevant global sanctions lists. 
• Speed of updates: To avoid firms missing out on crucial changes in information, their software should update itself rapidly to capture any changes in customer risk levels. 
• Matching algorithms: To avoid false positives, search algorithms should be able to identify individuals and entities accurately – for example, by accounting for global naming conventions, differences in spellings, and aliases. 

4. Assess integration capabilities 

Startups should prioritize a solution they can integrate into their existing tech stack with minimal disruption. How software solutions are implemented can vary, and each has pros and cons. A solution installed on-site, for example, may allow for more control over and responsibility for its infrastructure. However, this comes with greater regulatory ownership, a longer implementation period, higher costs, and the need for in-house technical support. 

A cloud-based solution gives businesses less technical responsibility over issues like maintenance and security. Solutions hosted in the cloud can also be scaled up and down more easily and are usually rolled out on shorter timelines. Ideally, a cloud-based solution will also provide access to ongoing external support.  

The most effective solutions tend to leverage application programming interfaces (APIs), which allow two systems to communicate with each other. This allows businesses to easily gain a holistic view of customers across different platforms. Startups should also consider the availability and usefulness of guides, FAQs, and other supporting documentation when making decisions. 

5. Make sure the solution is user-friendly 

A software solution’s effectiveness depends on how well its clients can use it. Examples of things for startups to look out for include: 

• Consolidated customer profiles viewable on a single screen, rather than siloed information, which can reduce efficiency and prevent true positives from being acted on. 
• Whether the solution allows teams to access data, decisions, and paperwork easily in the event of an audit, so that decisions can be clearly explained. 
• Automated event and customer risk rating, allowing teams to prioritize the highest-risk cases and streamline their workflows. 

6. Assess the solution’s data security 

Since secure AML compliance programs inevitably involve collecting sensitive customer data, any compliance solution should comply with privacy regulations and resist cyber threats. It should also have measures to avoid or minimize downtime in unforeseen circumstances, including specific disaster recovery and business continuity strategies. These should proceed from a defined risk assessment and mitigation framework. 

7. Check the vendor’s reputation 

There are several ways to assess a software vendor’s reputation. Startups can check client lists and any available case studies for indications that the vendor is experienced in dealing with customers similar to themselves and will be able to understand their needs. Vendors can also be externally rated and validated on industry-specific platforms such as G2 or certified by standards organizations like the ISO. 

8. Examine the cost-effectiveness 

Some AML software solutions cater to enterprise-level businesses and budgets; others have been designed with smaller, more flexible clients in mind. Some can carry out functions across the spectrum of AML compliance, whereas others are more specialized, single-purpose screening or monitoring solutions. Factors like these affect how cost-effective a solution is and should influence a firm’s decision to partner with a particular vendor. Startups should also consider the scalability of any software: given that the volumes and features they need will likely look different in 12–24 months’ time, their AML solution needs to be able to grow in alignment with their product roadmap. 

9. Ask for demos and a trial period 

Since the most productive vendor-firm relationships develop over time, allowing them to collectively refine and tailor their AML solution based on performance insights and feedback, settling on a software solution can be a major commitment. Making the wrong choice can have severe implications, particularly for early-stage businesses that aren’t able to write off large amounts of their budget. Demos and/or trial periods are a useful source of reassurance for startups, allowing them to check whether a given piece of software matches their expectations and requirements. 

Free AML compliance software for startups 

Our ComplyLaunch program gives startups who haven’t partnered with us before free access to ComplyAdvantage software. ComplyLaunch allows early-stage ventures to balance business growth with compliance obligations while crucially keeping costs under control and includes features such as: 

• Access to award-winning data: Screen customers against our proprietary sanctions, watch list, PEP and RCA, and adverse media data. All automatically updated in near-real time. 
• 24/7 automated risk monitoring: Safeguard your start-up with ongoing monitoring alerts related to relevant changes in risk status via a single API call.
• API-based integration with ongoing support: Establish operations with configurable cloud solutions in UI or API form and seamlessly integrate into existing workflows.