There is actually considerable risk related to non-compliance—making AML compliance extremely important.
The number of regulations is rising, and existing regulations are being updated regularly, making it difficult for compliance teams to keep up with the most current rules. To avoid the fines and penalties that come with violations and breaches, it’s essential for organizations to stay compliant and meet regulatory standards.
To help, teams need to leverage compliance risk management tools at their disposal. We’ll explore how to find the right fit for your organization by covering the following:
First, let’s discuss what we mean by a compliance risk management solution and what the main benefits are.
Compliance risk management software refers to tools that assist organizations in managing and mitigating compliance-related risks. Companies use it to ensure they adhere to regulatory requirements and optimize their AML operations.
These solutions—often referred to as Regulatory Technology (Regtech)—help businesses identify potential compliance risks, stay up-to-date on relevant regulations, and keep their platform secure from money laundering threats. If used properly, organizations can minimize non-compliance, prevent fines from regulatory authorities, strengthen credibility, and build customers’ trust.
Regtech solutions help teams stay compliant by automating and streamlining regulatory processes, monitoring for updates to applicable compliance regulations, and more!
If you’re struggling with an outdated, manual compliance risk management system, you know all too well the difficulties of staying on top of rapidly changing regulations.
Below, we cover the core benefits of a compliance risk management solution. (If you aren’t seeing these benefits with your current solution, you may want to consider a switch!)
- Ensure compliance requirements are met: At the most basic level, compliance risk management software ensures teams meet basic AML compliance standards—and avoid any subsequent fines and penalties.
- Improve decision making and performance: Compliance risk management tools are meant to empower teams to make better, faster decisions related to compliance and risk management. With the right information at their fingertips, risk teams can make reliable decisions on suspicious activity to stay within AML regulations.
- Perform investigations faster and more effectively: By automating routine tasks, streamlining workflow management, and offering rich data visualizations, compliance risk management solutions allow professionals to conduct investigations faster and more effectively.
- Improve overall efficiency and reduce false positives: These systems make it easier for risk teams to collaborate, improving operational processes and productivity. As you improve your compliance system, you’ll improve efficiency and bring down false positive rates.
Now that we know what the top benefits are, let’s look at how we can actually realize these benefits. Next, we dig into the top features to look for to get the best compliance risk management software for your needs.
There are a surprising number of compliance solutions available, with a wide range of features. While some specialize in certain areas, others offer a comprehensive, end-to-end compliance management solution for all AML compliance needs.
Below, we cover the top features to look for in a compliance risk management software:
Risk Assessment & Analysis
Compliance starts before any actual interaction with a customer—first, there needs to be a foundation that sets the tone for how compliance will be handled.
Organizations need to understand the compliance risks they face, which typically boils down to the costs of non-compliance. What are the fines and penalties you may face? What is the extent of the reputational damage you’ll suffer?
From there, teams need to make sure they understand what regulations apply so they can meet AML regulatory standards. Remember, regulations change based on the country, jurisdiction, and industry companies operate in, so it’s important to know what regulations apply to your organizations at all times.
Beyond that, this information needs to be integrated into your compliance program so that your team has a solid strategy for adhering to compliance regulations—and avoiding the penalties that come with AML compliance violations and failures.
AML compliance doesn’t just involve monitoring the transactions themselves—it’s also about knowing who you're dealing with in the first place.
Identity verification at the point of onboarding is an essential compliance requirement, mitigating fraudsters' ability to commit money laundering and empowering organizations to track criminals down after crimes are committed.
Companies need to meet basic KYC procedures, including Customer Due Diligence, Enhanced Due Diligence, sanctions list checks, and more. By performing adequate customer onboarding, organizations ensure the customers they are dealing with are who they say they are.
Regulatory Reporting & Filing
An essential component of compliance is regulatory reporting. For anti-money laundering processes to be effective, companies have to actually report suspicious behavior so that it can be investigated (and prosecuted) by law enforcement.
For most organizations, the main element of regulatory reporting is Suspicious Activity Reports (SARs). There are a few other reports that companies need to be aware of, such as CTRs and FBARs, but the most important—and the ones that carry the largest penalties for failure to file—are SARs.
Compliance risk management software helps teams file SARs faster and more effectively. Teams receive guidance on filling SARs out to ensure form fields aren’t missed—and no forms are submitted incompletely. Pre-built form-fill options are available that make it easy for teams to file reports for common incidents. Automated filing to FinCEN, goAML, and other regulatory agencies ensures that reports are never missed or filed late.
Case Management & AML Investigations
Regulatory reporting (covered above) is a major subsection of case management—but there is more to it than just reporting. Case management also involves perfecting operations, including optimizing workflows, prioritizing alerts and investigations, and managing the queue of cases.
AML investigations are a core component of case management; and how effective your team is at performing investigations has a major impact on your ability to stay compliant. If you can’t perform adequate investigations—and fail to meet AML regulations in the process—you can be subject to fines and penalties.
Alert scoring helps teams with workflow management, prioritizing—and even assigning—cases based on the highest importance. Link analysis and activity monitoring features empower teams to perform more thorough, robust, and fruitful investigations. And finally, clear, easy-to-interpret data visualizations allow teams to make better, faster decisions on cases.
A basic level of transaction monitoring is necessary to comply with AML regulations. After all, organizations are required to file reports for suspicious transactions—and to do that, you have to actually monitor and record transactions.
For companies subject to AML compliance laws, transaction records are essential for meeting auditing requirements. But transaction monitoring can be used for much more than the bare necessities of compliance—it’s also a vital tool for mitigating fraud, reducing false positives, and improving security measures. It can even be used to prevent fraud and money laundering before they occur.
Manage Compliance Related Risks with Unit21
Anti-money laundering (AML) compliance isn’t optional—companies are legally required to adhere to certain standards (and are fined for failing to meet those requirements).
This makes compliance a relatively clear-cut practice, right? The problem is that there are many different regulations, across different jurisdictions and industries. On top of that, the regulations themselves are constantly changing.
Teams using legacy systems are not only more likely to miss something and experience an accidental violation, but they’re also more likely to burn additional resources in the process. Compliance risk management software not only helps teams maintain compliance but also optimize their processes and better delegate resources.
Schedule a demo to learn how Unit21 can help you manage compliance operations and meet AML standards.