

Knowledgebase
The modern financial landscape is diverse and achieving effective AML compliance requires firms to manage vast amounts of customer and transaction data in order to address money laundering threats. Similarly, financial regulations change constantly while criminal money laundering methodologies grow more sophisticated or adapt to exploit new technologies. Given the complexity of the challenge, and the potential for heavy noncompliance penalties, AML should be a priority for every financial institution and the technology and software on which you build your AML solution. Leveraging an AML software vendor is therefore an important consideration.
Effective AML means balancing the regulatory requirements of your jurisdiction with your firm’s commercial and business needs. Ideally, your AML solution fulfils your compliance obligations in the most efficient manner possible, minimizing false positive alerts along with the other time and resource drains that make compliance so costly and affect customer experiences adversely.
With that in mind, in order to find the right AML software vendor, you’ll need to consider a range of relevant factors.
Your AML software vendor must meet the fundamental needs of your AML program, which will be based on the customers you serve and the financial environment in which you operate. From a regulatory perspective, an AML program should feature a number of essential risk-based controls including customer due diligence (CDD), transaction monitoring, sanctions list and PEP screening, and adverse media monitoring. In addition to those fundamentals, important considerations for your software solution include:
False positive AML alerts represent a significant time and efficiency drain for every financial institution, however, the right AML software vendor can help firms reduce their false positive rates. Certain features of an AML software solution are specifically useful in this regard:
Your AML software’s representational state transfer (REST) application programming interface (API) will determine how effectively employees interact with it and ultimately affect your compliance performance. Firms should assess the potential of an AML software vendor’s REST API to enhance their existing AML infrastructure:
The AML software vendor that your firm implements should complement the skills and expertise of the human compliance employees who work with it every day. However powerful or innovative your solution, it’s effectiveness will depend on the way in which it supports your compliance team and advances your compliance objectives.
Practically, this means assessing the strengths and weaknesses of your AML program and the teams that use it. Similarly, your firm’s leadership must have the AML experience and expertise to build an effective compliance program and select the technology best suited to it.
Firms must consider how their AML software solution will be deployed within their existing business infrastructure. Some software deployments will require on-premises installation while others may be able to run off-premises in the cloud.
While there is no one-size-fits-all solution, both types of deployment have benefits and drawbacks:
On-premises software deployments: While software solutions deployed on-premises offer a greater degree of control over compliance infrastructure, that control ultimately means more regulatory exposure for firms. On-premises solutions also entail higher professional service costs, longer implementation periods, and may require an IT department capable of performing all necessary maintenance, updates, back-ups and security processes.
Cloud software deployments: Cloud software solutions offer firms less direct control of their AML infrastructure but also reduce regulatory exposure by handling maintenance and security needs as part of their service offering. Cloud-solutions also provide a degree of flexibility when firms need to scale their AML program up and down and can be deployed rapidly compared to on-premises solutions.
AML requires firms to collect and store a range of sensitive customer information. Accordingly, the AML software vendor you choose must offer a suitable level of protection from cyber-threats and comply with jurisdictional privacy regulations such as the EU’s GDPR and California’s Consumer Privacy Act.
Similarly, your solution should also help your firm achieve ISO27001 certification: the globally-recognized standard of information security management. ISO27001 certification involves both technological and physical security controls but the protection your AML software confers will constitute a significant part of the accreditation process.
With this in mind, firms should ensure they have reviewed, and are comfortable with, their software vendor’s security policies. Vendors should also have disaster recovery and business continuity strategies in place to ensure that services and compliance responsibilities are not disrupted by unforeseen circumstances.
Artificial intelligence (AI) and machine learning tools can significantly enhance a firm’s AML compliance performance in a number of ways, not least by processing large amounts of data much faster than compliance employees ever could. AI tools, for example, may automate crucial CDD, transaction monitoring, and screening processes, helping to organize and prioritize unstructured data in a way that enhances the alert remediation process.
Similarly, software solutions that integrate machine learning models add an even greater degree of efficiency by exploiting previously collected data to optimize the AML process. Machine learning tools may allow firms to identify redundant or duplicate information during customer due diligence in order to identify emerging risks, speed up alert remediation, and reduce false positives.
Related articles:
To make sure you get a great experience on our website, we use cookies. If you continue to use this website or you click "Accept" below then you are consenting to this. Read more about our Cookie Policy
The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.
Comments
Share your thoughts and start a conversation.