Challenging the Current Approach: The Need for Uncertainty-Based AML Compliance

The Limitations of Risk-Based Approaches

The current risk-based approach to Anti-Money Laundering (AML) compliance has been widely adopted by the banking industry. However, it comes with several challenges and limitations that hinder effective decision-making.

Conceptualization Issues

The concept of risk is often misunderstood or misapplied in AML contexts, leading to inconsistent and inaccurate assessments.

Importing Concepts Without Realignment

Concepts from other fields are frequently imported into AML without proper realignment, resulting in a lack of clarity and coherence.

Lack of Agreement on AML Objectives

There is no clear consensus on the objectives of AML compliance, making it difficult to develop effective strategies.

An Uncertainty-Based Approach: A New Perspective

In light of these challenges, we propose adopting an uncertainty-based approach to AML decision-making. This approach has the potential to lead to more productive outcomes without the need for fines or external pressures.

Key Studies and Reports

Several studies and reports have explored the concept of uncertainty in AML decision-making:

• Johnson et al. (2022): “An Uncertainty-Based Approach to Money Laundering: A Theoretical Perspective”
• Ross and Hannan (2007): “Defining and Measuring AML Risk: The Role of Uncertainty”
• Favarel-Garrigues et al. (2011): “Decision-Making Under Uncertainty: The Case of AML Risk”
• Takats (2011): “Uncertainty in AML Transactions: A Banking Perspective”

Regulatory Reports

Regulatory reports have also explored the concept of uncertainty in AML decision-making:

• Regulatory Report on Unfair Penalization in AML Decision-Making (2021)
• Regulatory Report on Applying the Risk Profile Method in AML Decision-Making (2021)

Conclusion

An uncertainty-based approach to AML compliance could lead to more effective and efficient decision-making, without the need for external pressures or fines. While this is a scientific observation, it highlights the potential benefits of exploring alternative approaches to traditional risk-based methods.

References

• Johnson et al. (2022): “An Uncertainty-Based Approach to Money Laundering: A Theoretical Perspective”
• Ross and Hannan (2007): “Defining and Measuring AML Risk: The Role of Uncertainty”
• Favarel-Garrigues et al. (2011): “Decision-Making Under Uncertainty: The Case of AML Risk”
• Takats (2011): “Uncertainty in AML Transactions: A Banking Perspective”
• Regulatory Report on Unfair Penalization in AML Decision-Making (2021)
• Regulatory Report on Applying the Risk Profile Method in AML Decision-Making (2021)