Anti money

Online Anti Money Laundering Checks for Financial Institutions

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The anti-money laundering (AML) landscape has been around for a long time since the signing of the Bank Secrecy Act (BSA), 1970. It has become a battling ground for the financial institutions (FIs) for long now and these institutes are looking for no more changes in the regulations regarding AML compliance. 

But with the advent of new and sophisticated ways to launder money, the AML regulations are ever-changing. Over the years financial institutions have been confronted with $26 billion in non-compliance penalties.

However, FIs can solve this problem without creating any confusion with the compliance and regulatory authorities. For enhancing the capabilities of the compliance team, making the Anti Money Laundering Check swift for customers and reducing the cost for compliance, technologically advanced solutions can prove to be helpful for the sector. 

Current Situation of AML System

While the internet has created a digitally connected economy, the money laundering activities have increased due to an increase in the overseas transaction volumes. Along with the cross border payments, the everchanging AML regulations and the increase in digital payments have also increased the risk of money laundering. 

Due to these, FIs have to invest a considerable amount in their compliance department. This not only resulted in the loss of money but also contributed in making the AML compliance procedure more difficult and complicated than ever before.

Drawbacks of Traditional AML Programs

The traditional AML systems have huge overheads while employing manual procedures to update the client’s profile. This results in huge costs and unfortunately aren’t effective enough. Some of the major drawbacks of traditional anti-money laundering programs are: 

  1. It makes the due diligence process slower as it is difficult to handle large amount of unstructured data manually.
  2. The manual system doesn’t respond to the changing regulatory requirements quickly.
  3. Outdated systems results in errors. While reporting suspicious activity needs to be tracked down in real-time, traditional manual AML systems doesn’t offer this.
  4. The complexity in the financial transactions due to global financial transactions is very difficult to manage and track with the manual procedures.
  5. There’s always a chance of human error when the whole process is manually operated.
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As the traditional systems are becoming more and more outdated and costly, financial institutes are exploring new ways to perform anti-money laundering checks that are fast and cost-effective at the same time. Regulatory technology, which is mostly known as RegTech is one of the emerging avenues that could enable financial services to implement technologically advanced solutions aiding in their AML compliance.

Suitable AML Compliance Systems and Tools 

Technologies like AI, machine learning and big data are enabling streamline AML checks to onboard clients swiftly. One such example is advanced analytics, the system which can analyse the clients data and process it within minutes. Advanced analytics tools allow banks to venture through different legacy systems. It primarily uses machine learning algorithms that can learn from the data and past experiences. 

These systems sift through past data to determine legitimate or suspicious transaction activity. Such systems require large data to work with which the banks can easily provide. ML-based systems can help in the reduction of false positives, thereby saving ample time for the compliance team to focus on other issues.

Another simple yet very effective tool is KYC Screening. Know your customer uses artificial intelligence to perform background checks on individuals by screening them through global sanctions and PEPs (Politically Exposed Persons) lists. AML checks let banks to screen out money launderers and financial criminals. FIs can classify these persons according to their risk profiles. It can effectively help prevent criminals from entering the financial system by screening through anti-money laundering checks. 

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Postinweb is blog community and We are a young group of entrepreneurs whose wish is to give voice to disparate opinion-holders across various geographies. Shiva Ram is a Digital Marketing Analyst associated with the He is an active blogger and a business spokesperson.

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