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Traditional AML systems are falling behind against evolving threats: a smarter approach to AML compliance is needed.
AML is at the heart of the compliance function but financial institutions around the world still struggle with a range of efficiency challenges. There are plenty of ways that traditional approaches to the AML compliance process can drag the function down: poor implementation, expanding regulation, administrative complexity, false positives, and worse, false negatives, all quickly consume the time and attention of compliance officers. Over time, dealing with unnecessary AML workloads wastes resources, saps employee morale and, if threats arenât properly remediated and reported, exposes firms to potential criminal penalties.
In this increasingly challenging environment, financial institutions need to think differently about AML compliance, implementing solutions that are rigorous enough to satisfy their regulatory responsibilities but nimble and efficient enough to detect and address evolving criminal methods.
Fortunately, there is an answer to the modern AML compliance challenge: Smart AML.
Smart AML repositions the compliance function, going beyond the need to simply observe and meet regulatory standards by taking a data-centric approach backed by the latest advances in technology. The Smart AML approach utilizes specialized tools and resources, configured to each financial institutionâs risk profile, the demands of regulators, and the customer experience.
At the heart of Smart AML is the notion of solving old problems with new tools. From enhancing onboarding to reporting suspicious activity to the authorities, financial institutions must understand the possibilities of a technology and data-centric approach to the AML compliance process before they can exploit its potential.
With that in mind, letâs explore the ways that Smart AML can practically, and positively, impact the compliance function using an AML compliance checklist.
In every financial institution, onboarding is a crucial component of both AML concerns and customer experience. If the process is slow or fraught with unnecessary delays, customers are likely to go elsewhere, but if the process isnât intensive enough compliance may be jeopardized. To that end, Smart AML technology can consolidate multiple data sets and significantly reduce screening noise – delivering a significant efficiency impact during onboarding.
Smart Screening: Smart technology lets you tailor your screening process to the specific risk profiles of your clients. Practically that involves:
Rather than a one-off, box-ticking exercise to be completed and signed-off, Smart AML transforms compliance into an ongoing process which continues throughout the client lifecycle, evolving with the threat landscape around it.
This capability gives firms the power to begin progressive payment screening. Aided by up-to-date data and automated tech, progressive payment screening goes beyond the usual onboarding check limits by instead continuing to perform checks when the client engages in certain activities or payment types. In practice, progressive screening involves:
Traditional AML compliance best practises often generate significant slowdown during screening thanks to the sheer volume of data that has to be analyzed. The smallest errors in calibration can result in more false positives. Smart AML technology delivers an advantage here, too, since it lets firms isolate and monitor small batches of transactions, and ensure that both the volume and quality of generated alerts are appropriate for the risk profile.
In the past, if risk exposure changed, a company might have had to wait until it refreshed its compliance processes before it became aware of the issue. The advantage of smart AML is that it can be calibrated to adapt to the threat landscape, providing firms with a way to handle risks proactively and remain compliant even when the environment around them changes. Not only does this help firms streamline their normal KYC refresh processes but eliminate the unwelcome surprise of discovering compliance problems only when the regulators call.
Smart AML technology enables firms to react to changes affecting:
Configured to the individual needs of your firm, smart AML can significantly reduce noise and false positives but it obviously wonât eliminate money laundering threats completely, or indeed the need to deal with them. Fortunately, smart technology can also impact the way you make decisions about the money laundering threats you face, speeding up the way you remediate and report, generating meaningful insights, and passing efficiency benefits on to clients.
Smart AML solutions incorporate contextual data and automation to speed the decision-making process while connecting with other platforms in order to further streamline. When a client breaks a rule by doing business in a foreign country, for example, their KYC profile, informed by reactive, smart technology, may have already indicated their plans to expand – meaning your firm can react quickly to remediate and report the alert.
The remediation and reporting advantages of smart AML include:
Escalation and Communication: Ensure your AML tools let you escalate your suspicious activity reports quickly – and, just as importantly, communicate clearly with your compliance team.
Case Study: Â A firm with screening alert match rate of 22% had its compliance officers working on each alert for around five minutes, for a combined total of 40 hours a week. Transitioning to a Smart AML approach, and tailoring screening criteria to the risk profiles of its customer segments, the firm was able to reduce both the remediation time and workload for its employees. With the new approach, remediation time was reduced to three hours a day or less, which meant employeesâ time and focus could be redirected into the business.
Firms can gauge the success of smart technology implementation using criteria which track with their AML compliance checklist:
Internal Processes: Has the new approach reduced unnecessary work and optimized compliance skills and resources?
Smart AML is only effective as a convergence of technology and data, and the will of financial institutions to transform their compliance function. Embracing the smart approach is a way to empower compliance, and compliance teams, in an often-confusing threat landscape – and means treating compliance as a living, breathing process which can grow and change with the needs of institutions and their customers. Most importantly, Smart AML should be an option for companies of every size, from established international banks to fledgeling start-ups. The only obligation Smart AML places on its users is a desire to innovate and embrace change.
Automate onboarding and monitoring processes, whilst minimizing false positives, by utilizing a live global AML database of Sanctions and Watchlists, PEPs and Adverse Media.
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