Money laundering networks and terrorist financing rings are an increasing threat to the global financial sector. According to the United Nations Office on Drugs and Crime (UNODC), between 2% and 5% of global GDP (or between $800 million and $2 trillion) is laundered every year. But amidst the global financial crisis that emerged in the wake of the COVID-19 pandemic, bad actors from these disreputable organizations have had cause to celebrate. The general atmosphere of unpredictability has helped them hone their dark craft, and their methods grow more complex and elusive by the day.
Even if your own bank hasn’t been implicated in a major money laundering scandal, you wouldn’t want to anticipate the day when you and your customers have a rude awakening. It’s imperative that you guard your assets and your reputation through a robust and functional anti money laundering program. Small banks, mid-sized banks, and large financial institutions alike can be guided by these five principles for an effective AML program. Make sure to incorporate these into your rulebook for responding to and preventing financial crime.
Evolve Faster Than Today’s Financial Criminals
The very first principle that your bank has to adopt for its AML program is that you have to be faster, smarter, and more agile than the criminals who threaten your organization’s stability. Your AML policy can no longer be a game of simply following the money trail or pursuing leads when a crime has already happened.
The only way that you can successfully defend your institution from the wiles of these bad actors is to take a pre-emptive approach. Commit to addressing money laundering and other forms of financial crime by actively bolstering your current tech stack and the abilities of your AML staff.
Achieve a 360-Degree Vantage Point
Second, before you embark on any other retooling efforts of your AML program, you should invest in technology that helps you secure a 360-degree vantage point over all your transactions. Utilize the power of augmented intelligence, consolidated AML data management, and real-time monitoring to achieve a “bigger-picture” view of your whole organization and its vulnerability to financial crime.
There’s only so much you can do when you have a horizontal or single-direction view of your AML situation. In contrast, having full visibility over your organization from a holistic standpoint will allow you to implement major AML-related decisions with greater accuracy and timeliness.
Adopt Pattern-Based Thinking Instead of Flagging False Positives Piecemeal
Too many banks have set themselves up to fail against financial criminals by sticking to slow, expensive, and time-consuming methods for tagging suspicious activity. It will not be enough for an AML program to rely on piecemeal classification of false positives; oftentimes, in the time it takes to flag a transaction, the criminal will have already advanced in their dark agenda.
Your AML program should be founded on intelligent, pattern-based detection methodologies. Aim to use your AML toolkit to see through the hidden relationships or webs of behavior that may signal money laundering or other forms of illicit transactions.
Some examples of tools that can help you adjust to a pattern-based perspective are the following:
- Models
- Graph analytics
- Assignment of risk attributes
- Risk scoring
- Automated screening of appearances on blacklists or sanction lists
The level of investment you want to make in your AML technology is your prerogative. However, you must be able to use it to surpass your current limits on sorting, tagging, and responding to cases of note.
Be Conscientious about Regulatory Compliance
Bankers rarely think of their regulators as staunch allies. But the latter do serve an important role: they oversee important frameworks for modernizing banks and aligning their AML initiatives with global standards.
If you want to make a long-term positive impact on your AML program, you must be able to see your AML regulators as your partners in crime prevention. Being conscientious about your regulatory compliance can serve the dual purpose of helping you innovate your financial technologies and keeping you on your toes against the threat of financial crime. Knowing this, it would work in your favor to improve your compliance infrastructure, like the quality, thoroughness, and timeliness of your AML reporting.
Never Lose Perspective of Your Legitimate Customers
The last principle that should be a cornerstone of your AML program is to strive for your legitimate customers’ satisfaction. In the struggle to implement customer due diligence and stay on top of case management, banks sometimes alienate the customers who have come to them with legitimate business.
Don’t forget that a successful AML program should not impinge on these customers’ interests. Seek to tighten your grip on criminal behavior while still ensuring smooth, safe, and frictionless service to ordinary account holders.
Final Words
Overall, your bank’s AML program should improve your visibility over your bank’s transactions, allow you to apply pattern-based thinking, and empower you and your staff to stay several steps ahead of criminals. Don’t be complacent about the threat of financial crime, and retool your current AML program as necessary.
