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Customer Information Management

Trying to improve AML compliance? Avoid these 3 common mistakes

With money laundering and associated financial crimes topping US$1.61 trillion annually - and legislators enacting ever-more-stringent anti-money laundering (AML) laws - today's financial institutions are always looking for ways to improve compliance.

Read on to learn about some common mistakes and how to avoid them.

Common compliance mistakes

1. Trusting the "single customer view"

IT often develops "single customer views" for the purposes of targeted marketing. But the view needed for personalised marketing differs from the one needed to improve compliance. Entity resolution technologies may help marketing departments determine which John Jones is married to which Mary Jones, and to present the pair with financial offers they may not have qualified for singly. But those technologies may not be programmed to help banks determine that the couple's regular deposits of just under $10,000 indicate smurfing activity on behalf of large-scale money launderers. 

When IT says it is presenting you with a single customer view, push back to determine if the data fed through TMS systems is optimised for detecting suspicious activity. 

2. Blaming your TMS system for alerting on too many benign transactions, and missing too many suspicious ones

TMS are designed to take a microscopic, event-driven view of each transaction. Because of this, they regularly return false positives. (In fact, Pitney Bowes estimates the rate of false positives at 95 to 98 percent of all alerts.) Conversely, TMS often can't identify the tangled mix of synthetic IDs, false addresses, shell companies and deliberately clouded relationships money launderers use to hide their identities. How to improve this situation? See answer under mistake number 3. 

3. Buying point solutions 

Investing in a new TMS or other point solution won't improve detection of potential criminal activity. Instead financial institutions need technologies that provide them with a truly holistic view of each customer and his relationships. 

The solution? Technologies now on the market can help organisations find data throughout disparate, siloed systems and departments within the financial institution. These technologies verify and standardise data, then append the right information to the right customer record. These technologies also link records to unique parties and help to determine relationships among parties. This information can help provide financial institutions with a more holistic view of each customer, his relationships, and his patterns of financial behaviour. These capabilities are vital to banks as they work to improve  AML compliance efforts. 

Learn more 

Front page of 'Forbes Insight - Don't Blame the Transaction Monitoring Systems'Learn more about the compliance challenges facing financial institutions and the technologies that can help overcome them. Read Don't Blame the Transaction Monitoring Systems, a Forbes Insights white paper sponsored by Pitney Bowes.