We've Cracked the AML Conundrum

Anti-Money Laundering (AML) procedures and controls have never been as important to the stability of the global banking system.

This was driven home in April when Jamie Dimon, Chairman and CEO of JP Morgan Chase, one of the Big 4 US banks, said the following:

“The most painful, difficult and nerve-wracking experience I have ever dealt with professionally was trying to resolve the legal issues we had this past year with multiple government agencies and regulators as we tried to get many large and risky legal issues behind us.”

He added: “8000 of our employees will be dedicated solely to building and maintaining an industry-leading Anti-Money Laundering program.”

Anti-Money Laundering must up its game

Money laundering, make no mistake about it, is a rapidly growing problem.

It amounts to between 2% and 5% of global GDP, according to some estimates, while others value it at between US $1.44tn and US $3.59tn each year.

It’s also estimated that banks globally are spending US $10bn a year trying to contain money laundering and on other CFT (combating the financing of terrorism) measures.

This is more than short change.

Data cul-de-sacs

But there’s another problem.

Current AML automated monitoring systems are proving unable to cope with the scale and depth of the problem – not to mention its finesse.

Money launderers have never been as on top of their games as they are now, often hiding their activities within complex ownership structures, e.g. nested accounts that are unpinned by shell companies in multiple jurisdictions.

Lost? So are many of the world’s banks. To make matters worse, FIs are spending a lot of time, money and resource going up data cul-de-sacs.

Our own research into current FI systems suggests an average exception (anomaly) rate of 5% to 11%, of which a massive 99.2% are false positives.

In many cases, quite clearly, FIs can’t see the wood for the trees.

Under pressure

The long and the short of it is that compliance departments are under huge pressure.

Worse still, FIs globally are becoming more and more exposed to forceful visits, actions and multi-billion dollar fines by regulators.

Regulators, for their part, are increasingly savvy, too, using advanced technologies and techniques to find AML / CFT exposures, and to name every bank involved.

The growing level of market transparency means there is no hiding place for any exposed transactions from the past.

It is now simply a matter of time before they catch FIs up — and out.

The Anomaly42 solution

But it’s not all bad news.

We believe we have the solution for FIs globally in their ongoing battle against money laundering.

By automating the collection and connection of vast data ecosystems, and using next-generation algorithms and technology to understand them, we are able to flag up only valid exceptions and considerably reduce the number of false positives— saving FIs time and money while ensuring they stay on the right side of the regulator.

Crucially, our technology can continue to refine data and red flag exceptions on an ongoing basis – we call it ‘Living KYC’ or ‘Living EDD’.

It’s not a one-off project but a continual process embedded within a business that evolves as the business evolves, and protects it accordingly.

We have a White Paper covering this subject in more detail, but for understandable reasons it is only available on a restrictive basis.