Automated AML: Improving the Fight against Money Laundering

The scale of money laundering is staggering; a UN study puts it at two to five percent of global GDP, which equals $800 billion to over $2 trillion. With that amount of funds washing around and the speed of modern payments, it’s no wonder that compliance teams are facing challenges trying to ensure they comply with Anti-Money Laundering (AML) laws and help prevent illicit funds from entering the legal economic system.

To help understand this issue deeper and to how to better deal with it, Trulioo has partnered with PYMNTS for an ongoing report, the AML/KYC Tracker™. Download the Tracker to stay on top of the latest trends, techniques and information regarding AML/KYC:

Take a Deep Dive: An automated approach to the $2T Global Money Laundering Problem

The default solution for many financial institutions (FIs) has been to hire more people to vet accounts, perform due diligence, monitor transactions and handle other AML and Know Your Customer (KYC) procedures. These FIs understand that AML/KYC requirements are vital to avoid fines and help ensure their hard-earned reputation doesn’t get tarnished by a financial scandal. Having more people on the job is a go-to solution and seems viable, as it would seem to scale compliance’s ability to perform necessary AML/KYC tasks.

However, the reality is that increasing personnel is expensive and doesn’t necessarily solve the problem. Some FIs are spending $500 million annually on AML/KYC, while ten percent of the world’s top FIs are spending over $100 million each year. The whole governance, risk and compliance area accounts for 15 – 20 percent of operational costs for major banks, a major expense to say the least.

Problems with manual AML

One issue with manual AML processes is staff spending inordinate amounts of time on tasks such as data entry. These tasks are dull, repetitive and prone to error, thus better to suited for machines. By automating these type of activities, staff are able to optimize performance, as well as data throughput. As a result, staff is able to focus on higher value compliance projects, and less on manual and cumbersome processes.

Another issue is that compliance programs are often built-in silos, operating for one business unit, division or country. In these cases, there’s very little cross-functionality or consistency across groups and procedures are a mish-mash of varying standards.

If FIs actually take a step back and look at their compliance in a holistic manner, there are significant opportunities to improve performance and decrease relative costs with the use of automation technology. Inaccurate data is caught quicker. Data analysis becomes easier, providing better, more actionable insights. Decisions are sped up, as more accurate data and better analysis deliver a more nuanced view of the customers risk profile.

Every step of the customer journey and their corresponding compliance requirement has potential for improvement with the use of automation. From onboarding to transaction monitoring, watch list checks to audits, automated processes can streamline and speed up activities and improve the productivity of compliance.