“You will have to pay $1.9 Trillion for ignoring AML regulations,” this was the devastating statement by the U.S. Department of Justice for one of the largest banks, HSBC, in 2012.
Why did the bank have to face such a huge penalty? The bank was accused of allowing criminals to move billions of dollars and making business connections with countries sanctioned by the United States of America.
One must be concerned that one of the largest banks was not following the AML regulations or had not implemented bank compliance software.
Many times, financial institutions that have faced millions of dollars in fines do not intentionally allow criminals to launder money, but their AML software in banks isn’t efficient and accurate enough to monitor and detect unusual and suspicious transactions by their customers.
Though there could be many reasons for failure, one such is the less competent AML in banking systems.
That is why we are going to highlight the different types of AML software for banks that are used at different stages of customer transaction and identity verification today.
But before delving into the types of AML solutions for banks, let’s understand the importance of AML screening software for the banks..
How Beneficial Are AML Software for Financial Institutions?
Looking back at the consequences the banks faced due to non-compliance, AML system seems essential, though it is a tool to make banking operational by AML regulations.
Accurate and advanced software monitors millions of transactions in real-time and does not let any suspicious transactions go unnoticed.
It is indispensable for financial institutions, from customer onboarding to transaction monitoring, reporting, and generating red alerts for any unusual activity. Last but not least, it mitigates the risk of facing hefty fines and helps maintain regulatory confidence.
TOP 4 types of AML software for banks
If you search Google for AML software for banks, you may encounter hundreds of options available. But have you ever wondered what types of AML software are needed to meet regulatory requirements? Let’s understand today.
- Software to verify the customer’s identity
This is the most essential tool for any banking sector. When an organization onboards a new customer, it must authenticate the customer’s identity by collecting all the necessary information.
This information includes the customer’s first name, last name, middle name, nickname, where he lives, what he does, and source of income.
What is the purpose of collecting all the above information? It is actually a regulatory requirement and part of KYC, where the financial institution screens against different sanctions lists to check whether the person was involved in any criminal activity in the past.
Customer due diligence and enhanced due diligence are part of the customer identification process.
Effective visuals in the onboarding interface help streamline data collection and ensure compliance, making the process more user-friendly and efficient. Utilizing the best logo design software can also enhance brand trust and recognition during customer interactions.
- Transaction monitoring system
Knowing your customer’s identity is crucial, but that’s not all. That is just the first layer in fighting financial crimes in the banking sector.
As the banking system allows its customers to make thousands of transactions daily, monitoring their activities is crucial.
This is where the real money laundering activities begin, known as the layering process.
With an effective and advanced transaction monitoring system, banks can easily detect suspicious transactions and report them to the relevant departments for further investigation.
If the transaction monitoring system is in advance, it will be capable of monitoring the behavior change of customers and will flag if any customer behavior change occurs.
- Screening System
How would a business know whether the person sitting after them is criminal or not? Does it seem difficult? Yeah, it is if you try to check it manually.
However, with an advanced screening system like the one AML watcher provides, you can check the customer against the global watchlists, including the PEP list, sanctioned list, and fraud list, and also assess the level of risk each customer can pose to your organization.
- Anti-money laundering Case Management system
What if the compliance team successfully detects the suspicious transaction? What is next? The follow-up steps are very crucial, and that is the case management system.
There is a process that the person has to go through after it gets detected. With the AML case management system, the team checks the level of risk with a particular transaction, documents the record, investigates the person, and forwards the report to the relevant departments for further action if needed.
Do businesses need to implement all these AML Software in banks?
It is not practical for banks to implement multiple software solutions simultaneously. Multiple systems can compromise system performance, and financial institutions will have to recruit more people to handle each system.