Case Management for solving Fin Crime Risk

2019 saw the FCA dishing out the highest level of fines ever, totalling nearly £400m in a twelve-month period. This included hefty penalties relating to anti-money laundering failings.

However, in the FCA’s 2019 thematic review the organisation did provide its recommendations for how banks can better their AML processes, stating, “For an effective defense against money laundering, it is essential that each firm performs effective CDD.” Furthermore, the FCA asserted that, “By approaching C-AML with a holistic view of underlying processes, banks can streamline decision-making to support a better customer experience, improve risk management, and reduce costs.”

Currently, while most financial institutions (FIs) have put in place robust solutions to help manage the onboarding and subsequent KYC and AML checks process, many of these solutions only trigger a refresh of the information held on record about a counter party when a scheduled review is due, by which time fraudulent activity may have already taken place.

As a step up from this, there are solutions available that support an account data refresh when an “event”, such as change of ownership, registered address, etc. would trigger the said refresh, which give FIs greater insight into the underlying networks and associated parties of their customers. The largest drivers for a client account refresh are the various AML detection systems most banks utilise including transaction and payment systems, alert review systems, adverse media and name screening solutions.

While many of these solutions are fantastic at what they do, they all operate their own unique case management system. In a majority of cases where FIs use multiple competitor solutions for different parts of the AML process, the applications are not designed to communicate with each other which makes it difficult to link them together, as per the FCA’s advice. As a result, these mismatched systems create operational silos and disparate processes across the organisation.

This all leads to a variety of challenges for different stakeholder groups:

• Compliance: These teams are more susceptible to risk blind spots because they do not have a truly holistic 360-degree view of the customer. Often their investigations are more of an “art than a science”, with compliance officers preferring to work “off system” in static documents. This can lead to the resolution of the alerts pertaining to the same entity being missed as they are not being managed in one case, making it difficult for senior stakeholders to achieve a clear overview of each situation and truly understand the potential risk exposure of the counter party.
• Operations: They are currently overwhelmed with an excess number of false positive alerts, yet they all legally require varying degrees of investigation.
• Technology: Efficiency gains fail to materialise due to disjointed processes and data silos across the organisation.

The Benefits of Unified Case Management

In order to eliminate silos and achieve a holistic picture of clients and their associated risk, banks must implement a truly integrated financial crime detection platform whereby each AML solution uses the same rule-based system to guarantee their seamless interaction.

By using a single unified solution banks will enable more accurate detection and improved investigation procedures, giving an overall enhanced customer experience while also helping to manage counter party risk management for the bank and its stakeholders. It will also help eliminate any risk blind spots that have developed as a result of their vertically integrated legacy systems.

For example, where previously a few transaction alerts were analysed in isolation, they might not have appeared to pose much risk, but if a unified system can surface a newly identified politically exposed person hit and historical transaction issues, suddenly, the risk would warrant further investigation by the bank or FI.

A New Approach to Designing a Financial Crime Risk Management Solution

If banks can create this unified case management system, the results may well be fruitful. Some estimates claim that a financial crime management solution that utilises unified case management could reduce effort and cost across the customer lifecycle, with overall savings of up to 50% of operational costs. One bank using this approach even saw a 75% time saving on financial crime investigations.

Right now, the complexity of linking the various alerts that cover KYC compliance is so high, that very few solutions can actually cope. Therefore, to achieve that requirement, a full end-to-end solution with an integrated client lifecycle management (CLM) application is crucial, as opposed to simply trying to bolt two different systems together as many banks have reverted to in the past. This approach can help orchestrate the KYC process required by product type, jurisdiction, client type and more. With this method, banks have the ability to accelerate their compliance and onboarding process.