Advanced Operating Models
Dec 20, 2018

Why anti-fraud and anti-money laundering are ripe for consolidation

Anti-fraud and anti-money laundering (AML) have long co-existed as separate but related entities in financial institutions. Fraud investigations are more real-time focused, with the aim of stopping a financial loss event in progress, while AML is targeted on postmortem analysis to identify the systematic activities of making so-called dirty money clean. But, recently, there has been a trend, supported by regulators, toward combining the two functions under an enterprise-wide anti-financial-crime umbrella. The evidence is clear that the time has come for consolidation.

Our experience shows that using integrated anti-fraud and AML resources in a more efficient and less siloed way can drive cost optimization by 30% or more. This is because of the many similarities and connections between the two functions, including the fact that much of the data required to detect money laundering is the same as what's needed to prevent fraud. Knowing your customer procedures and documentation of expected activity for clients can also serve as important fraud tools.

Both teams use similar tools and investigative protocols for resolving cases, including red flag/alert scenarios across one entity for both anti-fraud and AML. For example, flags/alerts pop up when there's a burst in credit-card activity, a high-risk industry or jurisdiction involved, an unusual use of a card, or abnormal cash activity.

A majority of scenarios are common in a client environment, allowing for unified alerts. There's even a similar reporting and analytics framework, with a common filing of suspicious activity reports (SARs) and internal reports. On the human-resources front, consolidation allows for cross training, enhancing job responsibilities, mitigating the risk of inadequate coverage, and facilitating load balancing across individual units. Other benefits include:

  • Better servicing and reduced denial of services
  • Improved detection of fraud and money laundering
  • Aggregated reporting and a holistic view across lines of business, channels, and products
  • Higher quality, targeted actionable alerts and investigations
  • Fewer duplicate SARs and better SAR filings

Of course, there are challenges to consolidation, such as AML units having a legal or compliance background, while anti-fraud units are generally more operational. Organizationally, leadership in one area may lack certain domain knowledge in the other, resource allocation may be skewed, and, typically, legacy silos have competing priorities. Technologically, the tactical approach is often focused on solutions that are fit for only one problem. And when managing data, some of the issues that must be addressed include separate data infrastructure, lack of a common data and process taxonomy, and difficulties in governing data assets.

The question is, how do you overcome these challenges to achieve the significant benefits of integration? The short answer is to look at it as an evolving, two-stage process:

Stage 1: Moving from current state to a near-future state
The first stage is marked by increased collaboration and takes approximately one to three years. Cultures converge based on common values and objectives. There is increased communication among executive leadership and staff, and increased information sharing across all levels. The technology platform features the gradual development of a common case-management system that facilitates ease of handoff of files among analysts and investigators. All data finds its way to a common repository. There is also heightened cross-training among personnel.

Stage 2: Moving to a longer-term future state
The second stage brings about a complete integration and takes roughly two to five years. The culture is characterized by a unified experience across anti-fraud and AML, along with common policies and procedures. The organization is now truly one team, with common leadership and reporting. The technology showcases a centralized rules engine and detection/analysis system. Where once there were multiple databases, now there is a seamless 360-degree view of all pertinent data. And where there was once no common training of talent, and then for a time cross-training, now everyone receives the same training as anti-financial crime analysts, which enables firms to better attract and retain critical talent.

With patience, appreciation for the common bonds the two functions share, and a willingness to take the right two-stage approach to integration, organizations can embark on a transition that's ready to be made and reap the rewards of a consolidated anti-financial crime unit.

To learn more about this subject, check out our recent point of view “When it comes to anti-money laundering and anti-fraud, together is better."

This blog was authored by Genpact's Global KYC and AML Practice Lead Satish Acharya, Global Head of Risk Products and Fraud Ashwani Bhardwaj, and Chief Risk Consultant Jeff Ingber.

About the authors

Satish Acharya

Satish Acharya

Global KYC and AML Practice Lead

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Jeffrey Ingber

Jeffrey Ingber

Anti-financial crime practice leader

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