There’s no single anti-money laundering (AML) strategy that’ll protect your organisation from criminals and terrorists. The level of sophistication they use to launder money is frightening.
A robust approach demands several strategies, 10 of the most effective of which are set out below:
1. Employ AML specialists
Investing in in-house AML specialists will increase your bandwidth and ability to identify and assess the risks faced by domestic and international operations, and reduce the likelihood of regulatory sanctions.
Despite the benefits of and need to directly employ AML specialists, such skills are expensive. What’s more, while hiring AML specialists can solve problems in the short-term, it doesn’t address the need for sophisticated technologies to counter financial crime.
2. Upskill staff
Upskilling staff is crucial for ensuring AML and combating the financing of terrorism (CFT) measures are adequately implemented.
While upskilling an organisation takes huge resources and time, advanced training on how to spot AML risks, as well as AML systems and processes, should be compulsory.
3. Improve AML policies
Providing a structured AML policy framework should be a top priority when meeting AML obligations.
AML policies need to be easily validated by regulators, digestible for compliance analysts and mirror an organisation’s risk appetite. Be aware, one of the pitfalls of AML policies is they are often generated by several authors and never kept up to date. The result is best practice isn’t always adhered to.
4. Increase process controls
Increased and tailored process controls, combined with management oversight, risk assessment and fraud data, will help your organisation consider and respond to the multiple risks it faces.
Just a few examples of good process control practice include:
- Continuously reviewing processes and data patterns
- Engaging with relevant cross-industry efforts
- Having a robust response plan and investigation procedure
- Implementing a four eyes check
5. Perform model-driven validation
Erroneous or misspecified AML models may lead to expensive setbacks or regulatory fines. It is prudent to ask external compliance consultants to rigorously and regularly test and validate AML policies and models.
During model-driven validation, AML specialists have to demonstrate to senior management and regulators not only how their models are performing against expectations, but how risk exposures fit within defined bands of acceptability.
6. Leverage consultancy experience
Appointing a specialist AML consultant/consultancy offers a quick fix to help bring your organisation up to scratch with AML obligations.
Global financial institutions commonly hire expert AML consultants to support the design and implementation of client onboarding (COB), know your customer (KYC) and AML transaction monitoring frameworks.
However, choosing and hiring the right consultant is by no means an easy task and comes at a substantial cost.
7. Transform your AML and compliance operating model
A potentially cost-effective approach to managing AML operational processes is to create offshore centres of excellence in emerging market locations.
Firms in the UK, Europe and US are increasingly using centres of excellence in India and China for transaction monitoring screening, alerts management and customer due diligence (CDD). However, while cost arbitrage can improve your organisation’s bottom line, there are many factors to consider to make such a move a success.
8. Hire data scientists to support data analytics and predictive modelling for AML
Automating AML processes with data analytics and predictive modelling offers an innovative solution.
Moving from traditional rule-based systems to machine learning can speed up key processes in AML, such as CDD and transaction monitoring. That said, to be able to leverage machine learning and predictive models, organisations need to set-up data science functions and staff them with quants and modelling experts.
9. Deploy an AML analytics and augmentation platform
Deploying an AML analytics and augmentation platform involves plugging a new system into your legacy system to extend its shelf life.
This strategy goes further than a software patch but isn’t a complete system upgrade. It bridges the gap between new and legacy technology, and offers a quick and cost-effective solution.
If you adopt this strategy, be sure there are no compatibility issues.
10. Upgrade AML system
Ultimately, there comes a time when every organisation needs an entire AML system upgrade.
Given that AML systems are non-revenue generating and therefore commonly at the bottom of the investment list, for most this will be when their current system can be patched no more.
As you might expect, upgrading an AML system can be time-consuming and risky.
We cover these strategies in more detail in our white paper 10 AML strategies to protect your organisation.
Download it to discover how you can protect your organisation from money laundering.
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