The benefits of consolidation
There are many advantages to merging the AML and fraud functions, including:
1) A holistic view of the customer
Much of the data required to detect money laundering is the same data that's needed to prevent fraud. For example, both groups consider similar product types, such as international wire transfers and stored-value cards, to be high risk and therefore monitor them more closely.
AML and fraud prevention groups also rely on the same transactional parameters, account and customer information, peer group definitions, watch lists, and detection models. So, from business and compliance perspectives, there's value in a united database that provides a holistic view of a customer's relationship with the bank and any concerns that the relationship may raise. Such a view can lead to better identification of fraud and money laundering schemes that cross channels, products, and lines of business, and therefore greater visibility for management through aggregated data reporting.
2) Improved employee development and retention
AML and fraud prevention professionals tend to be knowledgeable about similar laws and adept at conducting research and complex analytics, interviewing people, and writing comprehensive reports. Alert and case analysis and investigations also require many of the same skill sets. Consolidating the two functions provides cross-training opportunities, which promote more well-rounded analysts and investigators. It can also improve employee morale and retention by providing more opportunities for learning and advancement. For example, rather than having AML and anti-fraud analysts review AML and fraud alerts respectively, businesses could have financial crime analysts review both. Consolidation also mitigates the risk of inadequate coverage and facilitates load balancing across individual units.
3) Shared policies, procedures, and tools
AML know-your-customer procedures and documentation of customers' expected activity can serve as an important fraud tool. And AML and fraud programs share many policies and procedures, including referral of information to law enforcement, termination of customers for inappropriate activity, and due diligence monitoring. Both teams also use similar tools and protocols for completing workflows and resolving cases. And certain delivery channels, such as online and remote access, are at higher risk for both money laundering and fraud and therefore require closer monitoring.
4) Better effectiveness and efficiency
There's also potential to eliminate redundancies by combining AML and anti-fraud efforts. Consolidation can lead to more targeted and actionable alerts and investigations, with all alerts for the same subject being displayed to the analyst. With more information available, investigators can reach resolutions more quickly. Fraud detection rates also improve, as well as the ability to better identify sophisticated schemes. For example, multiple low-value events may not be registered as frauds, while an enterprise-wide system that aggregates data can detect previously hidden patterns. AML and fraud prevention units working together also makes the handing off of alerts, cases, and investigations easier. This should result in fewer duplicate SARs and more thorough SAR filings.
5) Cost savings
There are potential cost savings realized through more efficient use of resources, including systems, data management, audit consolidation, reduction of IT staffing costs and software maintenance fees, and elimination of duplicate alert reviews and case investigations.