Efficient anti-money laundering processes impose significant costs for individuals and institutions that work with finances. Luckily, there are many types of artificial intelligence software that help to ease the process of applying AML procedures.
Anti-Money Laundering Software (AML software) contains programs that are used by finance and legal industries or other regulated organizations to prevent or report money laundering activities.
What Is AML Software and Its Types
There are four main types of anti-money laundering software: transaction monitoring systems, currency transaction reporting (CTR) systems, customer identity (name screening) management systems, and compliance management software. Suspicious activity can take many forms depending on the circumstances and, unfortunately, ordinary money laundering prevention regulations are not 100% effective. That’s why more entrepreneurs choose the automated processes instead.
Transaction Monitoring Systems
This type of AML technology is aimed at finding and identifying suspicious financial movements by using the clients’ history information and other details of their profile. Traditional scoring methods, especially for companies, require a lengthy collection of sets of documents, some of which, for example, financial statements, may turn out to be unreliable, and significant labor and time costs. The situation is fundamentally changed by the use of transactional data of the client: revenue, its size, stability and uniformity, taxes and fines paid, debt and payments on account of its repayment, and other data.
Currency Transaction Reporting or CTR
It is a very convenient and efficient AML software designed to identify transactions involving large amounts of cash, or multiple small transactions that combine large amounts of cash. For example, under the Bank Secrecy Act, transactions over $10,000 will be automatically flagged. If a client commits a transaction that does not fit into the pattern of their behavior, the system signals the need for verification. This solves the problem of clustering, dividing all client transactions into ordinary and suspicious.
Name Screening
Different countries and institutions or organizations have blacklists of people who are involved in criminal activities. Such an AML software helps to check through the databases of these blacklists to find if your potential customer or client is listed there. In addition to this, screening helps to see if the client is a Politically Exposed Person or is identified as a high-risk customer.
Compliance Management Program
The data management capabilities of AML software can be used to maintain detailed records of employee training and scheduled audits, and to track reports submitted to financial authorities. This AML software can be used in day-to-day compliance activities.
With the development of machine learning algorithms and neural networks (semantic analysis, pattern recognition, and other methods), AML software has made it possible to analyze information about customers from social networks in order to understand their way of thinking and needs. However, this technology trend has sparked a lively debate about the ethics of using personal data without permission.
Why Do I Need AML Software?
Money laundering refers to the disguise of the proceeds of crime and their integration into the legitimate financial system. Before the laundering of the proceeds of crime, it is difficult for criminals to use illegal money because they cannot explain where it came from. After laundering, it becomes difficult to distinguish dirty money from legitimate financial resources, and these funds can be used quite freely by criminals in the future.
It is a multi-step process in which money is accumulated, separated from its original source, mixed with legitimately earned funds, and then channeled back to its original source. Even before the days of electronic monitoring, it had been difficult to transfer large amounts without attracting the attention of law enforcement and tax authorities. In recent years, data analytics and machine learning have made the task of identifying illegal money even easier.
AML software is basically developed for simplifying the process of applying AML regulations. Due to the complexity of the original Anti Money Laundering Process and the number of human resources involved in the operation, many banks, other financial institutions, and business owners integrated AML software into their workflow.
Ensuring effective anti-money laundering and risk management is one of the most important responsibilities of a successful financial company. AML services of organizations must constantly monitor and ensure the identification of suspicious transactions, carry out checks on various lists that require special attention, and prevent risks using the Know Your Customer principle. All of these processes can be automated and less expensive if you replace the regulations with corresponding AML software.
How to Integrate AML Software?
AML screening software provides control of all customers and their transactions. The combination of analysis model detection, time series, group and relationship detection, text message and data exploration forms the basis for effective money laundering tracking.
AML technologies arrange a complete overview of the customer behavior and provide the user with all the necessary information on the customer, customer group, account, and transaction. The system identifies well-known typologies of money laundering and their new patterns by using mathematical and statistical methods. AML creates a dynamic profile for each client and every client group to identify the behavior of clients and groups over time. Changes in customer behavior and deviations from group behavior are immediately detected by the system through adaptive customer profiles and presented to AML staff as potential risks.
The essence of the AML software is that it’s freely configurable and customized for appropriate risk analysis set by the financial institution. The process places all customers, accounts, and business transactions under a wide investigation network, that includes:
- Client characteristics (nationality, connection to certain segments, etc., their behavior, as well as the similarity of names to names on national and international restrictive/watch lists are typical criteria for analysis and evaluation);
- Individual factors;
- Accounts and credit history.
AML Analysis of a Client
AML software offers a variety of analysis options:
- Standardized reporting of information to authorities in accordance with the provisions of the law: for example, the system generates country-specific reports to the authorities for all transactions exceeding a certain amount, including filling out a mandatory form and providing all required information.
- Drill-down (detailed) analysis with graphical presentation.
Case management and sequence of actions
AML software case management eases handling of questionable clients’ transactions and/or types of behavior:
• Suspicious customer cases can be handled individually;
• The documents required for or generated during the processing of evidence are administered for a specific case and stored as evidence of the verification performed;
• Integrated workflow components allow sequential monitoring of all cases. Thus, automatic escalation, along with integration into a mail message or workflow system, provides for the automation of your compliance process.
The entire process, from providing data by defining a base of evidence, analyzing, and monitoring suspicious cases all the way to reporting/reading/case management, is fully automatic and requires no intervention from workers (except for launching the program).
The AML program has access to all relevant data, irrespective of the source system, and sets up a standardized data store for key dates. The platform can be integrated into any existing infrastructure. All business transactions are analyzed and evaluated by applying the above methods and using indicators of suspicion.
Simplify the Process with AML Software
Every year, from $800 billion to $2 trillion are laundered in the world. The United States alone spends about $7 billion a year on fighting Money Laundering. Until recently, money laundering has been fought manually by verifying each transaction. The AML monitoring software should be implemented by a verified and trusted company with good feedback. You can check AML software for banks and other types of financial institutions by covery.ai.
The money fraud prevention system has many steps and levels of protection, and it takes a lot of investments and resources to implement all of the regulations without adding automated processes. For a successful AML software integration, a modern organization should also keep its internal regulations, procedures, and policies updated in strict accordance with national legislation and international practice.
