Financial Institutions Embrace Control and Human Review to Combat Financial Crime
A Shift in Approach
In a significant departure from traditional anti-money laundering (AML) and financial-crime compliance (FCC) practices, financial institutions are adopting an intelligence-driven, investigator-centered model. This new strategy prioritizes human review and control of output, leveraging advanced machine-learning algorithms to filter through vast amounts of data and identify high-risk transactions.
The Problem with Current Practices
Current FCC/AML infrastructures have been found to be inefficient and ineffective. A recent study revealed that 90% of current activities result in false positives, overwhelming law enforcement agencies and financial institutions with irrelevant information. This inefficiency not only wastes resources but also undermines the effectiveness of anti-financial crime efforts.
The Benefits of a Human-Centered Approach
By adopting an investigator-led approach, financial institutions can:
- Dramatically Improve Effectiveness: In detecting financial crime
- Reduce Strain on Resources: By automating manual tasks and streamlining operations
- Elevate Profile as Socially Responsible Actors: Improving public confidence in the banking system and reducing instances of money laundering, drug smuggling, human trafficking, corruption, and embezzlement
Success Stories
The investigator-led approach has already shown promising results:
- A North American bank used a combination of tools to eliminate 45% of cases in its enhanced due diligence pipeline.
- Another institution automated manual tasks, reducing the strain on resources by a significant margin.
Industry Experts’ Predictions
Industry experts predict that this new strategy will yield substantial benefits, including:
- Improved Effectiveness: In detecting financial crime
- Reduced Strain on Resources
- Elevated Profile as Socially Responsible Actors
- Increased Regulatory Engagement and Cooperation
Recommendations for Financial Institutions
To achieve these benefits, financial institutions are encouraged to:
- Review FCC/AML Activities: Stop activities that are not required by regulations or beneficial to law enforcement
- Add Intelligence to Decision-Making Processes: Automate manual tasks and create public-private partnerships to improve information flow and intercept prohibited activities
Conclusion
As the industry continues to evolve, it is clear that a human-centered approach to financial-crime compliance will be essential in detecting and preventing financial misdeeds. By embracing control and human review, financial institutions can ensure that their efforts are focused on the most valuable actions, ultimately benefiting both the organization and society as a whole.