How a Unified Case Management System Can Improve AML Practices   

In September this year, the ‘FinCEN Files’ – thousands of documents detailing $2 trillion (£1.55tn) of potentially corrupt transactions that were overlooked by the US financial system – were leaked. The data revealed how some of the world's biggest banks have permitted criminals to move dirty money internationally.

While this situation is appalling, there is reason to argue that banks have not actually done anything wrong. If a bank is worried that transactions made through their systems could be fraudulent, it is their responsibility to flag their concerns to their the local regulator, such as the Financial Crimes Enforcement Network (FinCEN) in the US. These reports usually take the form of a Suspicious Activity Report (SAR). Legally, banks have to know who their clients areare, and, in most cases, the organisations involved in this recent news story ticked this box and met their regulatory obligations. Yet, the files highlighted the ethical issues in this process, as the banks probably should have stopped the suspicious payments moving in case they were facilitating criminal activities.  

With the spotlight shining on them, banks must act now to improve this system and clamp down on fraudulent activity or risk ongoing reputational damage. Another challenge they could face is that regulators outside the US will get stricter off the back of this scandal, with greater scrutiny being placed on banks to make sure their anti-money laundering systems are up to scratch.

So how can banks make sure they are getting the detailed customer information they need to prevent money laundering, without disrupting the customer experience?

Building a holistic view of the customer

While many existing KYC and AML solutions are brilliant at what they do, i.e. generating alerts and flagging exceptions, they all operate within their own ecosystem or front-to-back solution, which has its drawbacks in terms of risk exposure.

Where financial institutions choose to 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. Where these systems do not match up, they create operational silos and disparate processes across the banks.

As a result, these teams could be opening up risk blind spots because they cannot build a complete customer profile. What’s more, when systems are siloed, it is easy to miss alerts pertaining to fraudulent activity because they are not being managed in one case. This makes it challenging for senior stakeholders to achieve a thorough overview of each case and properly grasp the potential risk exposure of the customer who could be carrying out criminal activity.

That is why banks must breakdown these operational silos and create a unified view of client risk. 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. This involves consolidating the platforms that are in use and aggregating customer data into a single system. By establishing a more holistic view of risk, banks will improve their detection capabilities and improve investigation procedures. Not only will this approach increase their chances of identifying criminal activity, it will lower the potential for reputational damage should a similar situation to the FinCEN Files occur, all while improvingwith minimal impact on the overall customer experience.

Transforming financial crime risk management solutions

A New Approach to Designing a Financial Crime Risk Management Solution

If banks can create this by leveraging a unified case management system, banks will reap the rewards the results may well be fruitful. Where this technology has already been implemented as part of a financial crime management solution, there have been reports of significant cost savings and a boost to operational efficiencies, with some banks managing to halve their overall operational costs. One institution even saw time savings of two-thirds on financial crime investigations as a result of using this approach.

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 vast quantity of alerts that cover are involved with KYC compliance is so high, that very few solutions can actually cope. What this means is that for banks to meet their regulatory responsibilities Therefore, to achieve that requirement, they must use a fullcomprehensive end-to-end solution alongside with a n integrated client lifecycle management (CLM) application is crucial, instead of merely  as opposed to simply tryingattempting  to bolt twolink together a number of  different systems, which has tended to be banks’ go-to solution previously together as many banks have reverted to in the past. This approach canWith this technology, financial institutions will soon have the ability to  help orchestrateorganize the KYC process required by product type, jurisdiction, client type, jurisdiction,  and moreor by any other characteristic they require. With this methodUsing the aforementioned approach, banks have the ability tocan accelerate increase the speed of their compliance and onboarding process, as well help to reduce money laundering activity that might be happening in their systems.  

The solution should be more about aggregation from multiple monitoring feeds. See the below from my first blog article.