Automated AML Tools Prove Popular For Compliance Efforts
A recent survey of banking executives showed the overwhelming majority plan to increase spending on automated Anti-Money Laundering (AML) transaction monitoring and on staff to help strengthen their compliance programs.
Darren Donovan, head of KPMGâ€™s Forensic Services said the survey, administered by KPMG during the Florida International Bankers Association Annual AML Compliance Conference, showed that some 75 percent of the respondents said they plan to either implement an automated AML transaction monitoring system, or upgrade their current one.
Of the respondents, the 29 percent who said they donâ€™t use automated tools, â€œThey probably also stand a pretty good chance of missing things, due to level of information that must be processed,â€ said Donovan. The automated functions of an AML monitoring tool helps with aggregation, a manual process canâ€™t do that,â€ he added.
If an institution is deficient in AML regulatory examinations, â€œit is likely that they usually are deficient in other areas as well,â€ he noted. Regulators need to have the ability to â€œlook backâ€ at transactions over a period of time, on a historical level for the purpose of detecting suspicious activity. Automated tools are popular with institutions for that very reason, Donovan pointed out, as it gives the BSA officer, and the regulators the ability to look for certain anomalies. â€œYou can sort through millions of transactions and decide if they are legitimate, or if they need closer inspection,â€ he explained.
The KPMG survey of U.S. and international executives found that more than 71 percent of respondents said their financial institution has an automated system to help monitor transactions and identify potentially suspicious activity. In addition, 68 percent of the respondents said they will be working to identify gaps and potential areas of enhancements to bring their automated system in line with leading financial services industry practices.
â€œThe regulatory environment and the need for accurate and timely detection of potentially suspicious activity and the reporting of Suspicious Activity Reports (SARs) demand the continued investment, said Donovan. â€œBut we are noting an ongoing struggle in the market to find and implement the appropriate solutions in line with regulatory requirements and expectations to get the job done.â€
For the institutions that donâ€™t have an automated tool for BSA to help detect suspicious activity, Donovan suggests, â€œDonâ€™t assume automatically that your institution canâ€™t afford it. There are other intangibles to associate with a BSA exam that turns up something bad.â€
To factor in the reputational risk is important. â€œInstitutions need to challenge themselves to look at the possibility of loss of reputation, and the regulatory risks associated with a BSA examination,â€ he explained.
Beyond an automated tool from a third party vendor, in-house tools can be developed. â€œThe more that you automate the process, the better chance you have in finding that anomaly among the thousands upon thousands of transactions each day. Remember, the criminals always try to fly under the radar.â€
Look at â€œKnow Your Customerâ€ (KYC), Donovan said. â€œYour customer service reps have to know their customers, and need to be able to spot something that doesnâ€™t seem right.â€ The best action is deterrence and detection, he noted, â€œHave them go in and flag certain transactions that donâ€™t fit in the norm.â€
Donovanâ€™s final points: â€œMy advice to institutions is: Take heed. The environment is changing. Donâ€™t create an Achillesâ€™ heel in your AML/BSA compliance efforts. You need to keep current with your peers, make sure you are comparable to them. If you donâ€™t have funding, think how to build a business case to build your program up. If cost is a problem, find out how others are doing it, seek out the solutions that work for others, and if you canâ€™t afford it, make sure youâ€™ve done everything you can to keep the compliance effort going forward. Be vigilant, own the process, know what is in your policies and correct the gaps as you find them.â€