Case management for AML purposes is a core responsibility of financial services companies. But how can organizations know if their case management system is actually running at peak efficiency?
The methods deployed for investigation can have significant implications if not properly managed from an operational standpoint. That is why, in this article, we’ll discuss the traits related to a successful AML case management system and how to effectively monitor and measure the most critical metrics and KPIs (key performance indicators).
But first, a quick primer on case management for AML.
AML Case Management Overview
What is AML Case Management?
AML case management for anti-money laundering is a regulatory-compliance process performed by financial institutions and other regulated entities to monitor, detect, investigate, and report suspicious customer behavior and connected third-party activities. These activities relate to possible illegal acts, including financial crimes and terrorism.
AML case management includes Know Your Customer (KYC) rules for customer verification and monitoring, suspicious transaction investigations, and AML regulatory reporting of suspicious activity through filing a SAR (Suspicious Activity Report) to FinCEN in the U.S., and the equivalent to regulators in over 50 international countries.
Why is it Important?
AML case management is essential because global regulators assess substantial fines and sanctions. Regulators can even launch criminal cases against the Money Laundering Reporting Officer or Chief Compliance Officer and their financial institutions or regulated companies for not following anti-money laundering compliance laws. Effective AML case management prevents harm to an institution's reputation and churn of good customers.
Problematic AML case management is like a category five tornado that can leave catastrophic devastation in its path, including fear, uncertainty, and doubt, then hefty fines and reputational harm when the winds swirling around the AML case management system results blow up.
FinCEN and other regulators’ fines for AML non-compliance can be assessed in the millions of dollars, depending on the size of the financial institution or regulated entity and the scope of the AML problems.
FinCEN publishes financial institution names and details of non-compliance cases on its website Newsroom as press releases. In addition, the media widely disseminates AML case enforcement stories with attention-getting headlines.
Modern financial institutions in the Fintech space must stay compliant with all regulations as well, which is challenging - since this rules are constantly evolving. It's important to have a clear, effective fraud and AML program in place that incorporates case management capabilities to stay protected.
What Does a Case Manager do for AML Compliance?
An AML case manager is an analyst or supervisor investigating suspicious activity alerts triggered by the transaction monitoring software. After performing a manual review, the case manager determines if the alert is legitimate, thus triggering a case to be created for further investigation, which is typically done inside a case management system like Unit21.
The case manager ensures that reports of valid alerts are filed with the designated AML regulatory authority, including FinCEN (U.S. Department of the Treasury) and regulators in international countries.
What are the Typical Steps of the Process?
Steps of the AML case management process include:
- Know Your Customer (KYC)
- Transaction monitoring using AML technology-based systems
- Investigating triggered suspicious activity alerts
- Placing holds on deposits and suspicious transactions
- Reporting suspicious activities by e-filing SARs by country
- Measuring AML results compared with goals
What is an AML Case Management System?
An AML case management system is the software used to investigate, track, and report suspicious anti-money laundering transactions. In addition, a case management system includes a repository of AML-related documents.
An AML case management system typically helps case managers streamline their investigation process with customizable workflow steps, audit trails, and automated reporting. The leading case management systems will tie in directly with an organization’s transaction monitoring system to provide a seamless experience.
Who Manages the System at a Financial Organization?
The Chief Compliance Officer (CCO) has ultimate responsibility for managing the anti-money laundering (AML) system at a financial institution, establishing company policies for the AML compliance program, and communicating results to the CEO and Board of Directors. The CCO may delegate AML system management to an AML Compliance Officer.
AML KPIs: What They Tell You and How They're Tracked
Standard AML KPIs include AML metrics and related KYC metrics, including customer transaction monitoring. When comparing KYC vs. AML, you’ll find that KYC (Know Your Customer) is a component of AML with specific applications. For example, AML KPIs may be grouped as results, efficiency measurements, costs, and good customer impacts.
The following list of KPIs is not all-inclusive but points out ways to track results and identify critical problem areas related to AML case management systems.
Examples of AML KPIs include:
- SAR disclosure rates
- Total alerts
- False-positive rate
- Number of AML monitoring scenarios to rules
- Operational costs of AML compliance
- Good customer AML turnover rate
- Negative reviews rate related to AML
AML KPIs for Results
KPIs relating to AML results help you measure the case management and AML transaction monitoring system.
SAR disclosure rates: When your entity tracks and categorizes the number of suspicious activity reports (SAR) issued to regulatory authorities through a SAR disclosure rates KPI, you gain an understanding of AML issues. Categorization should include the type of AML issue and the country of origin to highlight AML high-risk areas.
AML KPIs for Efficiency
AML KPIs for efficiency include the total volume of alerts, false-positive rate, and the number of monitoring scenarios to rules.
Total alerts: The volume and trends of alerts generated by your transaction monitoring system determine the analyst workload for case management and underlying causes for alert volume changes.
False-positive rate: If your case management system generates too many false positives compared to total suspicious activity alerts, then your company’s case management system isn’t finely tuned. As a result, your case management department becomes inefficient by chasing down too many alerts.
The number of AML monitoring scenarios to rules: When the system generates too many AML monitoring scenarios from rule changes or other issues, it becomes inefficient and may not be operating as expected.
AML KPIs for Impacts on Good Customer Retention
When the transaction monitoring system improperly places long holds on the funds of good customers due to false positives or other system problems, customers react negatively.
Good customer AML turnover rate: The customers may leave the financial institution or other regulated entity for a competitor.
Negative reviews rate related to AML: Good customers may vent on social media. And they’ll undoubtedly leave negative reviews. KPIs for good customer retention include reasonable customer turnover rates and negative review rates related to AML problems.
Additional AML Program Metrics to Note
AML KPIs for Cost Measurement: High operational costs can also point out problems with system inefficiencies that result in investigating too many unnecessary or false positive alerts.
Operational Costs of AML Compliance: Operational costs of AML compliance include team compensation, department expenses, and the cost of maintaining AML case management system software and hardware technology, including programming regulatory updates. The operational costs can be measured in total or through AML compliance cost per SAR or another measure in the denominator to reach a per-unit cost.
6 Ways to Measure AML Case Management System Effectiveness
This section describes how to measure the effectiveness of an AML case management system, what success looks like, and which six features provide ways to reach AML case management success.
You can measure the effectiveness of an AML case management system by examining its available features and technology.
Effective AML case management software lets you streamline and automate AML workflows, leaving an audit trail, and automatically issues SAR reports when required. In addition, you should be able to track and analyze AML compliance results and KPIs using an integrated software system.
Measuring success means that your case management system produces results effectively and efficiently to reduce AML compliance operating costs. Here are six traits of a highly effective case management system:
- Streamlines customized workflows - A case management system can customize workflows efficiently and standardize actions to conduct case management.
- Establishes audit trails - You need audit trails to improve system controls and trace system entries to their source. This system-created information is helpful for internal and external audits, including audits by regulators.
- Uses machine learning to reduce false-positive alerts - Machine learning, which is one kind of artificial intelligence, trains models and learns from data experience to improve results. This advanced technology reduces false-positive alerts, significantly reducing case management investigation time.
- Incorporates AML regulatory compliance updates upon adoption - Cloud-based AML case management software is automatically updated to respond to regulatory changes by the effective date of new regulation.
- Automates suspicious transaction reporting globally - An excellent case management system automatically files U.S. SAR forms electronically and international Suspicious Transaction Reports in over 50 countries through GoAML. Automation in report filing eliminates time-consuming, recurring processes that significantly increase AML regulatory compliance costs.
- Tracks AML KPI Trends - A modern, cloud-based case management system offers dashboards that compute real-time AML KPIs and monitor AML trends.
What To Do If Your System Is Failing
Recent AML trends include new updates to AML compliance regulations with stricter transaction monitoring rules and more transparency. As another trend, regulators push regulated companies to adopt better AML software systems capable of effectively handling AML case management with advanced technologies like automation, artificial intelligence (AI), and machine learning (ML).
Is your current AML case management system up to the task? Or should you look to replace it?
If your current solution is causing any of the following problems for your organization, it might be time to make a switch:
- The company doesn’t have consistent AML workflows and processes that leave an audit trail.
- AML case management has a large backlog of suspicious activity alerts to investigate.
- AML compliance costs are too high without advanced system automation.
- You’re not able to properly implement new AML regulations on time.
- AML non-compliance risks are high.
- The company can’t resolve internal and external audit report deficiencies and recommendations efficiently or promptly.
- The company’s AML analyst and management turnover are too high.
- You’re losing too many good customers, and your customer ratings are low due to AML-related problems.
Often, an existing case management system is a legacy system that’s expensive to operate and impossible to maintain. As a result, the system isn’t flexible enough, it doesn’t produce acceptable AML compliance results, and impedes case managers from completing investigations quickly. It's never too late to adopt a solution (or to switch to a better one); but it is difficult to choose the right time to do it.
Upgrade Your AML Case Management System
If after reading this it is clear that your current AML compliance system isn’t functioning at peak capacity, consider switching to Unit21's case management system. Unit21 provides an effective Case Management software product for AML and software products for transaction monitoring, identity verification, operations management, analytics & reporting.
The case management software includes necessary features to provide better-tuned alerts that limit the required investigations to detect valid cases for submitting suspicious activity reports. In addition, it offers a path to operational cost savings through automation, streamlined workflows, and automated reporting. Overall, you get a comprehensive framework for fighting fraud that can be easily added to your compliance tech stack.
Get in touch today to schedule a demo.