AML officers have critical individual duties in AML compliance management processes, and these duties induce some challenges.
In our articles, we frequently discuss how AML compliance management is difficult as fraudsters adapt to technology faster than we think and find out how to bypass rule-based AML systems. Moreover, abrupt changes in the regulations and an increase in severe sanctions are the other factors that make the AML compliance processes challenging. In addition to all these, the transactions can be carried out via digital channels effortlessly, so the number of transactions that must be analyzed is growing accordingly. As a result, challenges are getting more and more as well as the individual responsibilities of compliance officers are increasing. It is not hard to predict that these challenges will constantly increase.
There are some key challenges that compliance officers must overcome in the prevention of laundering of crime revenues. Luckily, there are also solutions for these key challenges even if unexpected changes occur in regulations, political agenda, or an increase in customer data. These key solutions are;
Unexpected Changes in Regulations and Political Agenda
One of the key challenges for compliance officers is abrupt changes in regulations and political agenda. Besides, when international transactions are also considered, all countries have different rules and regulations, and they also tend to change constantly. If compliance professionals cannot keep pace with these new and unexpected changes, operational failure might occur. These failures not only affect the compliance unit but also strain the compliance officer individually. Adapting to these regulations as fast as possible and ensuring their management is only possible with having an adequate infrastructure.
On the other hand, unexpected changes in the political agenda lead to new regulations and sanctions. The eruption of the Russia-Ukraine War and immediately after the sanctions against Russia is the most updated example. Besides, we should consider that these abrupt changes periodically emerge in the political agenda. At this point, determining a corporate AML prevention policy, building an effective technological infrastructure, and planning periodic training programs make the management of changes easier. Otherwise, the compliance officer must make a serious effort to determine what actions to take and how to manage these changes. As a result, this situation prevents the compliance professionals to use time effectively and induces late responses to the changes. The institution is ultimately subject to severe sanctions
High Costs of AML Compliance
The institutions’ perspective is crucial for AML compliance. If AML compliance is considered as a related unit’s problem rather than an institutional issue, this costs more than the necessary investment for proper AML compliance solutions. Besides, this situation induces that the compliance professional cannot benefit from the technology and compels to manage the process manually. Furthermore, only large-scale banks and financial institutions were able to reach such an advanced technology before. However, with the development of advanced and affordable integrated RegTech systems, medium, and small-scale institutions can also take the advantage of advanced technology. We discuss the importance of an integrated RegTech system in our previous article*. If the system does not provide an integrated approach to AML compliance, separate systems must be used for each process of AML solution. It costs higher than having an integrated system. In addition to this, management of the AML compliance process via a separate system has some disadvantages too. Briefly, using an advanced integrated system make compliance officers’ work easier by reducing manual work and have many financial advantages for the institutions as well.
Reporting and Case Management
After analysis and detection of suspicious transactions, they must be reported.
However, it is a time-consuming process for the compliance officer, as the reporting procedures require adding a lot of detailed information. Besides, compliance professionals prepare these reports manually, so this may cause mistakes and this situation creates pressure on compliance professionals as well. Another critical challenge is the case management process which necessities to file and managing each case in detail and completely. In addition to this, if the management is not carried out in a single place, the professional must work with a series of tables and standard office programs. These reports are crucial since they must be prepared and reported to the authorities on time to not only prevent sanctions but also increase the credibility point of an institution. Therefore, to provide compliance officers to use their time effectively, the reporting and case management processes must also be carried out through a single platform that is integrated with all AML compliance processes.
False Positives
The main reason for false positives is the insufficient features of the AML detection system. In many of them, potential risks are defined over a single rule. However, various factors must be evaluated for the detection of financial crimes. Enriched filtering options are one of the crucial features of reducing false positives. Moreover, negative media coverages, public data, and data from different institutions as well as core banking data should be analyzed together to minimize false positives and focus on the real positives.
For instance, the threshold for name similarity in sanctions or PEPs list searches is often set too low to avoid the compliance officer’s risk of missing an illegal activity out. However, this causes the compliance officer to compel to deal with too many false positives. At this point, enriched filtering and easy data discovery features are critical to detecting the person who is most likely to act illegally.
Technological Deficiencies
As we know, AML compliance processes are challenging, and technological deficiencies make compliance processes harder. It is possible to solve all the challenges that are mentioned in this article with powerful technologies. You can view our article about the technologies an integrated RegTech system must include. *
Excluding Data from AML Compliance Analysis.
Banks and financial institutions provide new services and products periodically. However, if the data which come from these new services or products are not considered during the AML analysis, the compliance officer may miss some suspicious activities out. The data of a new service or product must be included in AML compliance analysis directly. To provide this, the system must connect different and distributed data sources and transfer the related data to the AML compliance officers on time.
Datactive RegTech Solution
An efficient AML compliance system enables compliance professionals to use their time effectively and protects your institutions from sanctions and reputational losses.
Do not waste your time with deficient systems and manual processes. Contact us to learn how to fight anti-money laundering and combat the financing of terrorism.