Maintaining compliance feels like a moving target in this ever changing financial landscape of today. Fighting against financial crimes like money laundering schemes and terrorist financing is the responsibility of financial institutions. Currently, stakes are high as the United Nations Office on Drugs and Crime (UNODC) estimates that $2 trillion, or 2% to 5% of the world’s gross domestic product is laundered each year. Ongoing AML screening has emerged as an important tool to combat these challenges by providing companies with a constant defense against new threats.
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What is Ongoing AML Screening?
Continuous anti money laundering screening can be defined as a process of continuously observing consumer transactions and activity in order to identify emerging hazards instantly. This type of procedure guarantees that clients stay compliant all over the duration of their association with the company, unlike conventional compliance checks at onboarding.
What are the Key Components of Ongoing AML Screening
Real Time Monitoring
Constant transaction and activity monitoring to detect unusual patterns if they occur.
Dynamic Risk Scoring
Customer risk scoring as per their exposure to vulnerability and providing an up to date risk profile.
Regular Data Updates
Continuous checks against updated sanctions lists like PEP profiles and adverse media screening ensure no risk goes unnoticed.
Automated Alerts
Immediate notification helps to get notified for any changes occurring in customer risk status that ensures swift action.
Real life case studies
NatWest’s £264 Million Fine for AML Failures (2021)
NatWest admitted to serious AML compliance violations in 2021 as it was hit with a record breaking £264.8 million fine. Over the course of five years, the case involved a tiny business in the United Kingdom that deposited a shocking amount of £365 million in cash. There were small deposits made up to £1.8 million every day. Such nature of cash transactions were significantly higher than what was typical for a small firm of this size but NatWest did not properly look into the matter. This kind of breakdown in continuous anti money laundering monitoring made it possible for possible illegal activity to go unnoticed. NatWest was criticized by regulators for its inefficient risk assessments, inefficient AML screening software, and lack of suitable controls. The story of Natwest bank puts emphasis on how proactive AML solutions are crucial and how a thorough, continuous AML screening procedure may have identified and stopped such high risk.
Westpac’s AUD $1.3 Billion Fine for AML Breaches (2020)
Westpac is one of Australia’s largest banks that faced a record AUD $1.3 billion fine for anti money laundering violations in 2020. It included overall 23 million breaches of the Anti-Money Laundering and Counter Terrorism Financing Act and these violations were about failures to adequately monitor transactions which were linked to high risk jurisdictions. If we talk about the most serious breach, it majorly involved transactions potentially linked to child exploitation, which the bank failed to flag or assess properly.
This scandal exposed Westpac’s weak anti money laundering monitoring framework and the lack of adequate ongoing AML screening. It also stressed about the gaps in the bank’s screening software which failed to track high-risk transactions in real time.
What are the challenges in ongoing anti money laundering screening?
Some of the key challenges are given below:
Data Overload:
Handling the big amount of alerts produced by automated systems can be one of the most difficult aspects of continuous AML screening as compliance teams find it difficult to efficiently prioritize and look into the thousands of transactions that are identified every day. This overburdening situation leads to delays in recognizing real threats that may result in a high chance of non compliance.
False Positives
False positives is a term which means valid transactions are mistakenly reported as suspicious and that becomes a frequent problem. Moreover, it leads to wastage of time and money which can damage the relationships with clients who are the focus of needless scrutiny.
If we talk about a high false positive rate, it detracts from actual threats and reduces the effectiveness of the screening procedure.
Integration Complexity
It can be technically difficult to amalgamate anti money laundering screening software with older systems that are established. Usually organizations face difficulty to introduce new screening with their existing infrastructure which leads to delays and possible gaps in compliance procedures.
Data Accuracy and Consistency
AML monitoring’s effectiveness is majorly dependent on precise and current data. Sometimes it might be challenging to preserve consistency with so many data lists worldwide, such as databases of sanctions and international watchlists. Additionally, information that is out of date or inaccurate makes it more likely that important warning signs will be overlooked.
How can AML Watcher save you from such a mess?
Safeguard your business against the modern threat of financial crime with AML Watcher. It is designed to tackle compliance challenges head on, it provides real-time monitoring, dynamic risk scoring, and instant alerts to keep your organization one step ahead. With access to 100,000+ global data sources, including sanctions, PEP lists, and adverse media, AML Watcher ensures comprehensive and accurate screening.
Get in touch with AML Watcher today and say goodbye to false positives in compliance!
