5 Anti-Money Laundering Compliance and Defense Tips

Anti-money laundering compliance program has fresh challenges every day – maintaining operations and the latest developments in placement, layering and extraction of illegal money and other fraudulent actions. Its compliances have been an ever-vigilant process. Fraudsters are always looking to focus on weaknesses in banks.

There are three stages of money laundering and banks must watch out for fraudsters. All it takes is for one bank to falter and fraudsters gain a new portal to launder money. That bank’s weakness could affect the entire industry, bringing greater regulatory scrutiny down upon all financial institutions. Nearly all major regulatory changes have come because of a catastrophe.

It takes a variety of anti-money laundering compliance checks to fight against money laundering. Here are five tips for financial institutions to combat the challenges.

1. Improve Searches with Technology

It is increasingly difficult to separate potential serious threats from the various false positives turning up in searches. Many alerts need to be checked out to get a net over the scrutiny of all the accounts in an establishment. If false positives are reduced, the scope of reports can be expanded to a more granular level, thereby making reporting more straightforward.

Using technology, like AI, to conduct constant searches can reduce the burden for anti-money laundering compliance officials, essentially removing some false positives while expanding searches. With technology, investigators can check out a broader scope of alerts without having anyone physically browsing all of them. It makes for better coverage while letting the staff devote their efforts to accounts that deserve their time.

2. Have Regular Cross-Communication

It is essential to regularly communicate with state and financial law enforcement agencies and banks to debate trends and new ways adopted by people to bypass the system. Enforcement provides intelligence about fresh scams to banks, though banks are often seeing these scams before enforcement. Banks can offer more insights to the enforcement agencies this way and work in tandem to keep the fraudsters out.

By having regular meetings, banks and enforcement agencies can verify suspicions, identify possible networks, and enhance the public-private partnership, creating a united front against money launderers.

3. Use Data Analytics to seek out Patterns

Data analytics plays a crucial role in combating money laundering. It helps in finding multi-factored fraud patterns occurring in a particular geographical area with a specific product type, from customers with a precise occupation.

Once AML officials recognize questionable patterns, they develop client models, tiering potential risks, and incorporating daily negative news alerts. Investigators would see correlations between negative news and any account characteristics, whether it is geography or other factors. The goal is real-time analysis of a customer’s risk before they enter the bank. Finding individuals with multiple PINs or connections to tax fraud are among the various factors that would trigger further investigations.

4. Standardize Organizational Systems

As many banks have grown via acquisitions of rivals, they have often pieced together a network of legacy computer systems. Some divisions may use spreadsheets, and others may use ledgers. This disparity of systems can hinder anti-money laundering compliance programs, preventing various branches from effectively communicating with one another.

This is why a growing number of financial institutions are getting into a digital environment, expanding their use of cloud software and extensive data, overlaying standardized definitions and inventories across the whole organization.

5. Structured Training is important

Anti-money laundering compliance analyst teams have three dedicated officials—a trainer, a developer, and a facilitator – liable for new employee orientation and training. These trainers also provide remedial training for officials to bring everyone up to speed and routinely put the whole bank through its paces.

Training front-end staff to look for suspicious actions is critical – they are your first line of observation. For instance, say the account of an incapacitated elderly person is getting used for fraudulent purposes by relatives. While the back-end staff might not have a suspicion initially, a client servicing representative could voice concerns that an account holder seems unaware of actions being taken in his or her name.

The Continuous Fight to Combat Money Laundering

From large banks to small credit unions, all financial institutions are always on the lookout for money launderers. By integrating the right technology with the right training of people and a strong partnership with enforcement, banks can combat the increasingly sophisticated money launderers within the U.S. and abroad more effectively, preventing criminal activities from continuing during their watch.

WRITTEN BY

Team Eela

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