Anil Kondla
Last Updated on March 10, 2024 by Team Experts
Money laundering, fraud, the funding of terrorist organizations, and other forms of financial crime have long haunted banks of all sizes. But the practice of anti-money laundering (AML) compliance is something that banks should evolve with the times. Factors like the shift towards digital technologies—both on the consumer and provider sides—and the air of uncertainty that drives consumer patterns in the era of COVID-19 are things that banks should closely consider. Consequently, banks must see the challenge of meeting international AML standards as different from what it was before. This is the only way to shield the bank’s resources, as well as its good name, from the taint of financial crime.
Unfortunately, there’s been some hesitation—especially on the part of small and mid-sized banks—to either upscale or streamline their existing AML technologies. Decision-makers from these institutions often regard integrated AML software as either too great an investment, or unnecessary, given their small scale of operations. They may elect to continue with their legacy AML framework, consisting of multiple AML systems, because it seems more cost-efficient and less stressful. Sticking with the old systems, however, may prove even more costly in the end. By failing to recognize the many barriers they’ve set up for themselves in their IT environments, banks may fall behind and expose themselves to malicious plots by bad actors.
If you want to give your own institution a fighting chance against financial crime, harness competitive new technologies for it, and remain in good standing with your regulators, upgrading is the only choice. Your bank’s future depends on AML cloud convergence, or the use of end-to-end, integrated AML solutions for your compliance needs.
For executives who are considering a cloud-based solution for their AML strategy, here is a briefer on what AML cloud convergence will achieve. This article will explain its benefits to your bank’s AML framework, as well as impart some tips on how to onboard a proper solution. Avoid a fragmented approach to AML and instead advocate for a holistic, integrated methodology that can better safeguard your bank’s future.
The Need for AML Cloud Convergence: A Situationer for Small and Mid-Sized Banks
The best argument for rethinking your current AML situation is this: your business model and the nature of your customer base may have changed greatly over the past few years. Your bank may have expanded its current product lines or overseen new mergers and acquisitions. For every addition to your infrastructure, product offerings, and assets, you will need to implement more exhaustive AML. But if this is done by simply adding AML systems and managing several of them at the same time, AML frameworks may become more difficult to implement and harder to reconcile.
Adding so many layers may even defeat the purpose of AML compliance altogether. In the confusion of managing so many disparate systems, banks give financial criminals an opportunity to slip through the cracks. Slowness with technology and disjointed AML strategies are essentially the best smokescreens that money launderers have in continuing with their nefarious deeds.
For banks, the buck should not stop at simply onboarding new AML infrastructure. It would be good for banks to explore integration infrastructure for AML, or a solution that will sync its AML software components to work even better together. The great news is that many global banks have warmed up to the idea. According to a 2019 survey by Accenture, about 57% of global banks had begun adopting cloud-based strategies for operations, including for AML. Due to even more widespread usage of digital technologies circa the outbreak of COVID-19, this percentage is likely to have increased.
Given, too, the unique risks of operating in a digital environment—including the evolving smarts of criminal networks—increased cloud deployment of AML strategies will be a welcome development for your bank. Now that the times have changed, and now that the threats to your resources have grown more complex, it’s high time to use AML cloud convergence to your bank’s advantage.
How Will Your Bank Benefit from an Integrated and Cloud-Based AML Solution?
There are several ways that your bank can benefit from AML cloud convergence—not only in terms of AML compliance and strategy implementation, but also your overall growth. Below are three specific challenges that an integrated solution can help you meet.
Fewer Resources Exhausted for More Efficient AML Compliance
When it comes to compliance standards, small and mid-sized banks have the same rules to follow as bigger players in the industry. But at the outset, larger institutions may seem to hold the advantage because they have more resources available to spend on AML compliance. Is there a way to even the playing field so that mid-sized banks can respond to that same challenge?
In truth, AML cloud convergence via an integrated solution can help smaller banks meet the compliance standards upheld by regulators. Such a solution may even help them become better at certain compliance tasks. For example, smaller institutions may see an improvement in the accuracy of their AML risk scores. This increases the chance of nurturing better audit relationships and keeping a sterling reputation among regulatory bodies.
If you onboard this kind of solution for your bank, you’ll notice that better compliance is possible without having to allot unreasonable amounts of time, money, or productivity to compliance management. The cost of ownership, maintenance, and operation will also be lower for an integrated cloud solution. You will no longer need to spend so much money on labor for various AML systems. Instead, you commit to working smart on just one system that takes care of AML compliance for you.
Greater Technological Proficiency When Implementing a Pattern-Based AML Approach
Right now, your bank’s IT staff may be feeling the weight of slow, isolated, or redundant legacy systems for AML(Anti- money laundering). There may be multiple data sets to comb through, not all of which can promise completeness or consistency. Moreover, staff may need to endure longer implementation cycles for completing key compliance-related tasks. There’s also the trouble of going between one system and another and aiming for different goalposts that relate to model validation and infrastructure upkeep. This kind of tech environment doesn’t empower IT staff or compliance officers to practice the most effective approach to AML: reading patterns in customer transactions.
The rationale behind a pattern-based approach to AML is simple. It involves harnessing centralized data management and up-to-date data analytics solutions from the cloud to identify patterns in suspicious customer behavior. The focus should not be on flagging individual transactions as either false positives or false negatives and reconciling these in a piecemeal manner. Rather, IT staff and compliance officers should seek to centralize their AML case management and base their decision-making on a wider, more holistic view of your financial data.
Integrated software will afford your staff an instant 360-degree view of all your customer data, eliminating the time and effort they would expend on reconciling these separately. It will also allow them to derive information about money laundering threats using detailed scenarios and threshold simulation, which in turn helps them spot hidden relationships between trends in know-your-customer (KYC) data and fraud. Put simply, AML cloud convergence will help your bank tackle these problems with the reach and abilities of a bigger player, and thus safeguard it more effectively against financial crime.
Heightened Responsiveness to Customer Expectations
Not to be forgotten in this equation are your bank’s customers. They’ll want to know that their money is safe with you, especially in a time of such great socioeconomic distress. Consumer trends in banking are changing at such great speeds, and financial criminals will be quick to take advantage of the general mood of uncertainty.
In improving your AML strategies through cloud convergence, you can show your customers that you are the financial service they need you to be. This is your opportunity to prove that you’re ready for such threats and that you intend to protect their finances and personal data from wayward forces.
The Way Forward: Converging AML in the Cloud
Starting your bank’s journey to the cloud and achieving AML(anti- money laundering) cloud convergence may be difficult at first. But the experience will be much more pleasant if you find a trustworthy vendor for AML as a service. Look for one that offers AML cloud services inclusive of data management, advisory services, and implementation support, among others. The best providers will help you migrate from your old AML core platforms to a more streamlined and integrated solution, all without disrupting your business or shaking up its culture.
It’s also important to look for a cloud-based solution that can adjust to your business’s level and pace of growth. Say for example that your bank is pursuing new growth ventures in emergent technologies such as cryptocurrencies or non-fungible tokens. You will want an AML solution that can match that growth potential while keeping your data safe.
Eventually, your bank may be capable of some important breakthroughs, like striking a balance between mitigating the risks of money laundering while still keeping your customers happy. But this will only be possible if you rethink your core AML strategy.
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