Why and How to Connect your Disparate AML Compliance Systems

September 26, 2019

Let’s review some of the pitfalls financial institutions face with having disparate AML systems. I plan to share with you some best practices in the industry, and then share key takeaways on consolidating systems that leverage best in class technology and data.

We can start by taking a look at a day in the life of a compliance officer to illustrate the complexities facing compliance teams in 2019.

With the myriad of regulatory obligations that exist, many organizations have built out solutions to address each unique requirement.

Many of the FIs that I’ve advised have automated some of these processes wherever viable. But the reality is, many of these processes remain manual in nature – such as checking for adverse media on the internet - or reviewing client data from spreadsheets. And this is how “silo-sitis” sets in.

For example, a compliance officer may start her day by assessing a screening application – and then moving to conduct a sanctions search on the OFAC site, and then she has a separate tool for submitting SARs, and so forth.

All of these processes do indeed serve their purpose of BSA/AML compliance. However, taking a step back, the picture looks fragmented.

Siloed Departments

Recently a Chief Anti-Money Laundering Officer (CAMLO) lamented that her Financial Intelligence Unit and her onboarding teams rarely communicate with each other: they sit in separate offices and use distinct and separate systems. As a result of this disjointedness, her FI onboarded a client for a mortgage - only later to realize this individual had a watchlist hit for various financial crimes. Delayed analysis like this can be an unfortunate symptom of having disparate tools.

In speaking with another compliance officer at a bank, he observed that over the years his institution did not consider solutions until they encountered a specific problem. As more regulatory requirements surfaced, the bank would then purchase Band-Aid solutions for each particular problem.

In my experience, this band-aid approach is problematic for three reasons:

  • Efficiency – disparate systems make it difficult for AML investigators to pull together all relevant information as part of their investigation. They often struggle with false positives, and incomplete client data as they try and piece together bits of information. Consequently, they’re spending their time on relatively low-value activity when they ought to be analyzing, investigating and reasoning.
  • Incomplete Integration -- These solutions rarely communicate with one another. Unless there is an established partnership between these systems with robust APIs, the FIs I have advised spend a significant amount of time re-keying information between systems.
  • Auditability – This is the one that keeps my clients up at night. With the spectre of compliance looming larger and larger for financial institutions, you can’t afford to have records that are not auditable.

FIs have built up multiple solutions to address their various regulatory obligations but often find these tools working disparately when these tools don’t connect to one another: technology can become a burden rather than a benefit, and moreover, the systems can fail to catch risks and keep the organization compliant.

Push to be innovative

In a recent survey by Refinitiv entitled “Innovation and the Fight Against Financial Crime” 82% of respondents said they are under pressure to be more innovative, and yet 73% are struggling to harness technological advancements.

One of the trends we are seeing when it comes to innovation is a move towards enterprise AML solutions that offer a complete picture, a single platform and an optimal process.

In my experience, some of the most tangible benefits of a consolidated system are:

  • It enables the compliance team capture a 360 degree risk view.
  • Establishing an increased culture of compliance across the organization.- resulting in engagement from all stakeholders – from staff on the front-line all the way up to the C-suite
  • It allows you to build out smart workflows that allow for proper escalation and case management in line with the policies and procedures of the FI.
  • It allows the FI to future proof the system….by giving it the flexibility to adapt to new typologies. This is not a “set it and forget it” exercise. Change will happen; either new regulations are enforced, or the business introduces new products, or expands into new countries…a consolidated system gives you the flexibility to adapt with these business requirements.

At the institutions that I have advised, when the organization starts to realize some or all of these points is when compliance can actually become liberating.

Please click on the link below if you would like to watch the full webinar on this subject that I presented with Catherine Banks from Refinitiv. To find out more about how CaseWare’s Alessa can help your company focus on the AML compliance taskssanctions screening or other related workflows, please contact us today.

About Eric Hansen

Eric Hansen (CAMS) (LinkedIn) is a Senior Risk Specialist at Caseware RCM. He has been consulting clients globally on matters of Risk and Compliance for over ten years. Eric is a member of Transparency International where he serves on their working group for Beneficial Ownership transparency. Previously, he was a Director of Risk & Compliance at Dow Jones Canada where he advised clients on areas such as AML, Anti-Corruption and Economic Sanctions.

Try Alessa