Anti-money laundering (AML) has been a focus of regulatory and enforcement activities for several years, and, with heightened concerns about the financing of terrorist organizations like Islamic State group, AML likely will continue to be the subject of close scrutiny. Merely establishing an AML program is not nearly enough—banks also must verify that their programs are operating effectively and efficiently. AML analytics dashboards can help bank directors and compliance officers do just that, acting as an early warning system when a program isn’t operating at desired levels.
An AML analytics dashboard is rapidly becoming a necessary tool for bank directors and compliance officers to take a proactive stance toward changes to their institutions’ AML risks and AML system and model performance. Banks can use AML analytics dashboards to improve the agility, efficiency and effectiveness of their AML programs and reduce the risk of fines and other government actions. In particular, dashboards can help banks to accomplish the following critical compliance activities.
Monitor for and Raise Alerts About Risk Profile Changes
A bank’s AML risks change in response to new regulations as well as to changes in customer base, product and service offerings, and money launderer and terrorist group behaviors. With the rapid pace of such changes, it’s no longer sufficient to examine an AML monitoring system annually—bank directors and compliance officers need the ability to view their AML risks on an ongoing basis.
An AML analytics dashboard provides bank executives up-to-date information on the bank’s current risks in a format that is easy to digest and further analyze. By continually monitoring the firm’s AML risk indicators, executives can proactively alert management when an indicator reflects a significant change to a component of the bank’s risk profile. The dashboard then allows directors and compliance officers to examine the details of the change so they can determine what triggered it and take appropriate action to mitigate any increased AML risks. For example, an AML analytics dashboard can raise an alert if the number of customer wires to or from high-risk countries increases by a predetermined percentage within a certain period of time.
Monitor AML System Performance
Banks typically have multiple systems for AML monitoring and compliance, including transaction monitoring systems, customer due diligence and risk scoring systems, and sanctions screening systems. These systems sometimes fail due to technical issues or human errors. In addition, these systems must be periodically tuned and optimized to maintain their effectiveness.
An AML analytics dashboard can monitor the health and performance indicators of these systems and alert bank directors and compliance managers when potential issues are identified. For example, a spike in suspicious activity alerts produced by a transaction monitoring system could indicate a system issue or an increase in money laundering activity. An AML analytics dashboard also can monitor and send notification about issues related to use of the system and compliance workflows—for example, if suspicious activity reports are not being filed in a timely fashion.
Perform “What-If” Analyses for Changes to Systems, Programs, and Models
When performing an optimization exercise on an AML system, or implementing a new system or monitoring rule, bank directors and compliance officers must know the cost implications in advance. An AML analytics dashboard allows management to examine the implications of implementing specific system configuration changes and to perform “what-if” analyses. This is particularly valuable when conducting model tuning exercises. For example, compliance managers can evaluate in real time the staffing impact of setting a threshold for an AML monitoring rule to a particular value as compared with an alternative value.
Demonstrate AML Compliance and System Effectiveness
AML monitoring systems and models must be validated and audited on a regular basis. Regulators will conduct periodic examinations to confirm that the AML systems have been properly configured and optimized to execute the bank’s AML processes. An AML analytics dashboard can be used as part of a conversation with auditors and regulators to demonstrate how the bank’s AML models, systems, and processes are performing in real time. It also can be used to demonstrate effective oversight of the bank’s AML models.
Implementing an AML analytics dashboard can prove time-consuming, so banks without a dashboard should start gathering the requirements now so they can reap the benefits as soon as possible. Regulators likely will begin to expect banks to have these systems in place in the relatively near future, and bank directors who want to stay ahead of the curve will make implementation a priority.