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5 reasons why automating AML is a must for asset managers

Not only does it enhance CX, but financial crime compliance is a route resiliency in a competitive market, avoiding huge fines, and reducing TCO. Read 5 reasons why.

Connor McCauley
February 28, 2024

The wealth and asset management sector is estimated to make up about 24% of the world economy. And it isn’t going anywhere. As Millennials and Gen-Z grow their wealth, the sector is expected to become more digital.  

Unlike in the retail banking and payments sectors, asset services and fund managers deal with a much lower volume of transactions, but much like their retail counterparts, they need to compete with the fintechs looking for a piece of the pie.  

Not only is customer experience (CX) important, but financial crime compliance (FCC) is a route to remaining resilient in a competitive market. Below are 5 reasons why FCC automation is the pathway to a more competitive market offering.  

1. Compliance: friend not foe of CX

Financial crime compliance is more and more about protecting the consumer. The FCA’s Consumer Duty underscores the importance of potential harms that behavioural biases can cause customers, by outlining that ‘firms should not seek to exploit customers’ behavioural biases, lack of knowledge or characteristics of vulnerability.’ This encourages firms to make services more understandable to customers, so they make decisions that are better for their money. Complying with these regulations is beneficial to the customer experience.  

Automating customer due diligence processes speeds up the verification process, removing the need for repeat manual data entry and document checks for customers. Automated software that gives a top-down view of all customer and intelligence data in a single dashboard, with automated sanctions screening updates is a fast track to onboarding customers smoothly.  

Read more about NextGen Client Screening here

2. Fines cost more than just money

Despite the lower volume of transactions in wealth and asset management compared with its retail banking counterparts, the sector is not immune from regulatory pressure, nor financial crime. In the UK market alone, the sector faced significant anti-money laundering (AML) fines, totalling a staggering £3.8m in 2023. This figure accounts for 7% of the UK’s Financial Conduct Authority’s fines of £52.8m in 2023.  

Alongside fines, the cost and futility of attempting to uplift legacy systems to meet modern compliance demands has distracted leaders from ensuring growth in their business. These manual or legacy systems are often slow to run, demanding high levels of manual intervention, and are unable to keep up with the performance requirements of today. When looking at the total cost of ownership (TCO), including the cost of fines, remediation costs and reputational damage.  

Read more about the cost of compliance here

3. Significantly reduce TCO

This brings us onto our third point. By automating compliance processes, analysts can drive down false positive rates and reduce wasted effort, ensuring they are focused only on risky activity. Multiple screening configurations can be used in a single instance, partitioned to meet data residency regulations around countries and entities. Low-code solutions give AML teams the power to implement new rules and configurations within minutes, creating speed to market.  

The reduction in the number of customer screening hits that require manual review brings down alert review time, and Full-Time Equivalents (FTEs) required, ultimately leading to reduced TCO.  

Learn more about reducing false positives in client screening here

4. Keep up with new market entrants

Not only do retail banks have to keep up with the increasing market share of fintechs, payments firms and neobanks. Wealth and asset managers also need to compete with newer players gaining market share from younger generations with their digital-first products. Younger generations expect smooth and quick onboarding and are likely to give up applying for financial services after long KYC checks. This is why automating compliance processes is a competitive differentiator.  

5. Streamline data for smoother operations

Meeting regulatory demand is currently complex due to disparate data across the fund distribution chain. Customer due diligence checks are often duplicated, as the same information is required over several stages. Additionally, cross-border clearing, and settlement have a lack of harmonisation, resulting in the draining of significant resources.  

More digital-friendly solutions require good data hygiene to help automate onboarding and transactions. This translates to a better CX and improved transparency.

See how FundsDLT reduced asset manager operational costs by automating FCC

What does this mean for wealth and asset management firms?

Maintaining client relationships is imperative to this sector, and having automated financial crime compliance processes in place is a key contributor to improved CX. Not only should firms implement automated customer due diligence at the onboarding stage, it is crucial that ongoing client risk is reviewed, especially in cases where sudden changes in transactional activity occur.  

Learn more about the benefits of automated client screening in our latest whitepaper, ‘Sharpening Sanctions Compliance with NextGen Client Screening.’

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