What type of risk monitoring software is essential to conduct effective AML risk monitoring? Financial institutions stand at the very front lines in the prevention of money laundering and financing for terrorism.
Given the increased regulatory requirements and scrutiny, coupled with the sophistication of criminal networks, how can banks and payment providers be prepared to monitor transactions and customers against suspicious activities effectively? The answer lies in risk monitoring software.
Automated risk-based monitoring tools are essential, according to AML compliance manager Jane Doe: “Manual review of transactions doesn’t scale in today’s digital economy. We were looking for something that could keep up with the pace of transaction volumes and apply sophisticated rules and algorithms that would surface the truly high-risk cases.
It revolutionized how we work by automating all repetitive tasks and thereby allowing us to concentrate our time on those exception cases that need human judgment.”
Let’s discuss how risk monitoring software can help you smoothen your workflow and enhance risk detection.
Why risk monitoring software is necessary for AML compliance
With new schemes of money laundering catching on every day, one can’t keep up with compliance manually. Thousands of client profiles and transactions have to be monitored back-to-back. How can a small team of compliance officers stay on top of everything? This is where risk monitoring software steps into the frame.
The software takes over the struggle of low-level monitoring tasks and, in an automated manner, applies the individual risk rules. This will free compliance teams to focus on what matters: high-risk cases that need human judgment.
Experts say that by 2024, advanced analytics and machine learning technologies will be implemented in 75% of global financial institutions against financial crime.
Automated monitoring and alerts
Risk monitoring software intelligently separates the low risks from the high risks, rather than one’s having to sift through every single transaction. It applies machine learning and analytics of past cases to the continued monitoring of activity, automatically flagging anything unusual in real-time.
Compliance officers then only have to review the alerts the software raises. This prioritizes their time for the most relevant cases. Software integration also means any suspicious activity is promptly reported with clear reasoning.
By the year 2023, over 60 percent of large financial institutions have institutionalized risk-monitoring software infused with artificial intelligence.
Bonus: Book a custom demo to watch a live demonstration of a risk-monitoring software platform and learn how the right solution can help your organization meet the Ongoing Risk Monitoring process.
Key features to look for in AML risk monitoring software
- It allows the creation of custom rules and scenarios to identify possible money laundering concerning your particular risks and your data in a client’s profile. Rules over time can be tuned due to changing risks.
- Continuously monitor all transactions as they occur, applying your AML risk monitoring rules in real-time against them to flag any unusual activity.
- In case of a breach of set rules, any activity is auto-generated for review when necessary. The software can manage escalated instances in one place.
- It picks up data from multiple internal and external sources to provide an all-around view of clients and transactions to enhance AML risk monitoring.
- It ensures that your AML risk monitoring stays compliant as regulations continue to evolve by automating framework and rule changes.
Risk scoring and risk-based approach
To effectively manage the Ongoing risk monitoring process, software assigns numeric scores to entities based on characteristics like location, transaction history, and client profile. This risk-based approach prioritizes who and what gets additional scrutiny based on likelihood.
As more data is analyzed over time, the risk scores are continually refined. This helps compliance teams stay focused on the most pressing risks.
Advanced risk scoring is estimated to drive down compliance costs by up to 20% while it increases the detection rate for actual financial crimes by more than 30%.
Reporting and data analytics
The most fundamental ingredient is collecting relevant data from various risk monitoring services and systems. The software provides one place to gather tools for reporting and trend analysis.
It capitalizes on data in continual risk monitoring to bubble up trends and insights that otherwise remain hidden. It shall be possible to generate standards and reports about all risk-based activities to comply with a whole set of monitoring and auditing needs.
Integration into other systems
It provides the ability to quickly draw on information from other internal databases, thus providing a complete 360-degree view of the customer.
This will be very conducive to risk-based decisions in AML and continuous monitoring. Integration also translates to the ability for new issues to be flagged automatically across several combined systems for rapid remediation.
Benefits of using a risk monitoring software solution
- Automates repetitive monitoring tasks to save time and allow focus on priority cases.
- Applies sophisticated rules and algorithms to surface truly high-risk transactions and entities.
- It can easily be expanded to accommodate growing clients, transactions, and complex rules.
- One place for all internal and external data unified risk view. Centralized workflow for alerts, case management, and reporting.
- More cost-effective compared to traditional models involving human review by compliance teams.
- It provides features tailored and configured to specific risk factors and business needs.
