The State of Fraud and AML: How to Build a Successful Program
August 10, 2022
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We’re sick of fraud draining your business of income you deserve! To help risk and compliance professionals with what they actually need, we surveyed professionals in the industry about what matters to them - and what they think they need the most.
231 Fraud and AML professionals participated, including representatives from the front lines, all the way up to the C-suite. And based on their responses, we’ve been able to analyze and synthesize the current state of risk and compliance and provide you with valuable key takeaways on what is working when it comes to running a successful risk and compliance program.
Read on to learn what tools are necessary to build effective systems for fraud and money laundering detection and prevention.
How to Build an Effective Fraud and AML Program Based on the 2022 State of Fraud and AML Survey
1. Reduce Your Reliance on Engineering Support
Keeping up-to-date on all current and applicable regulations, upgrading your tech stack to keep pace, and ensuring your systems are ready for any threat is no easy task.
The fact is, managing these requirements takes significant resources, and unfortunately, even with the introduction of modern Regtech tools like Unit21, many of today’s organizations still rely heavily on internal support from engineering to do their jobs effectively. This is problematic because our findings show risk and compliance teams lack the engineering support required to stay ahead of the rapidly evolving conundrum that is financial crime.
Since one of the biggest challenges facing fraud and AML teams is the lack of engineering support to stay on top of rapidly changing regulations, it makes sense to implement systems that can be managed directly by risk and compliance teams. This really is a win-win because, as the people on the front lines in the fight against financial crime, they have direct knowledge of how the system should be set up to flag suspicious activity.
On the flip side, engineering time is best spent on building and maintaining great products as this directly impacts the organization’s bottom line.
We’ll have more to come on how to accomplish this in the full report, but the takeaway here is that the most successful programs are built using cost-effective tools that are flexible and easily managed without the consistent help of engineering teams.
2. Work to Reduce False Positives
If you are a professional in Risk and Compliance, it will probably come as no surprise that repeatedly, fraud and AML professionals made it clear their main objective was to reduce false positive rates.
False positives are a huge problem in this industry, with the standard being that 95% of all suspicious activity alerts turn out to be benign. Obviously, following up on countless alerts that do not indicate a true threat is an immense drain on resources. Not only that, it is demoralizing for the team - think about Sisyphus, doomed to push a rock up a hill only to have it roll back down for all eternity…
While you can never fully eliminate false positives, reducing their rate can help you maximize productivity, improve team morale, and reduce operational costs which all have a direct impact on revenue.
To do this, the best risk and compliance teams use transaction monitoring software that allows rules to be tested before deployment. Unit21 customer Flutterwave achieved a 14% false-positive rate by running their rules in shadow mode before activating them in the system.
Platforms like Unit21 also use machine learning algorithms to help teams prioritize alerts, which is an added productivity hack when there is a backlog of alerts to investigate.
3. Invest in Reliable Transaction Monitoring and Case Management Software
The majority of fraud and AML professionals agreed that transaction monitoring and case management software were the most critical tools for building an effective risk and compliance program.
Transaction monitoring software is necessary for automating analysts' work and meeting compliance requirements.
Without a system for identifying suspicious transactions (or other activities that appear to deviate from the norm), it would be impossible for financial organizations to keep their customers safe from fraud and prevent other instances of financial crime.
Along the same vein, case management software helps investigators automate manual tasks and keep track of the minute details pertaining to each alert investigation, saving teams time on analysis, identifying and resolving alerts, and filing reports.
However, not all transaction monitoring and case management systems are created equal. Based on the findings in our report, it is clear that finding the best software for transaction monitoring and case management to suit the needs of your specific organization is a critical step in building an effective risk and compliance operation.
What’s Working in Risk and Compliance: Closing Thoughts