Regulatory requirements are rapidly evolving to ensure financial institutions and businesses stay abreast of anti-money laundering (AML) compliance policies and are doing all they can to prevent fraudulent activities such as BIN attacks and card payment fraud. Analyzing, scoring, and prioritizing alerts help teams effectively manage the threats they face.
While these strategies can help risk teams stay vigilant and flag suspicious activities promptly (sometimes even before they occur), what happens when these alerts remain uninvestigated and accumulate in backlogs? Here, we explore the concept of alert backlogs and their consequences on businesses.
What is an Alert Backlog?
An alert backlog refers to an accumulation of uninvestigated suspicious activity alerts. For organizations, alert backlogs indicate that alerts are not being addressed quickly enough, and may be a sign that the alert handling process can be improved and optimized.
Alert backlogs can accumulate for a few main reasons:
- When an organization’s transaction and event monitoring system can’t effectively filter false positive and high-priority alerts, therefore increasing the number of notifications to be investigated.
- A backlog of alerts from a previous period is left uninvestigated even after being scored.
- When a firm is under-staffed with inadequate compliance, risk, automation, and analytical teams to investigate and escalate or resolve the inflow of daily suspicious notifications.
Alert backlogs, in general, can cost businesses both funds and reputation. When alerts are left uninvestigated, not only will the workflow be clogged, but fraudulent activity will go unnoticed, causing harm to customers and—by extension—the business.
Many organizations rely on manual, time-consuming processes to analyze customer behavior and transaction activity, consuming too much of team members' time and sometimes causing delays in filing Suspicious Activity Reports (SARs). Instead, teams should rely on alert scoring solutions that use machine learning and predictive analysis to help manage and prioritize alerts more effectively—which can learn and improve from behavior over time.
Above all, when alerts aren’t effectively managed, money laundering and fraud are left unchecked. This leads to a further drain on resources, making it harder for organizations to meet regulatory requirements and address all the threats they face.
The Consequences of Alert Backlogs: How They Impact Organizations
An unending inflow of alerts combined with limited resources available to analyze a transaction, score the behavior of the customer and investigate or resolve the alert are the main reasons for a backlog of unprocessed notifications.
These shortcomings can have a major impact on organizations. Below, we’ll explore some of the biggest consequences of alert backlogs on businesses.
Missed Fraud Alerts + Cases
At the most basic level, an alert backlog means cases aren’t being investigated and addressed on time.
This delay leads to alerts being investigated far too late—putting organizations in a position where they can’t actually prevent fraud, but are instead responding to incidents that have already occurred. Accumulating alerts also makes it extremely difficult for teams to prioritize the biggest threats, as there are more cases to sift through.
Even worse, while these alerts sit uninvestigated, bad actors are able to continue to commit financial crimes like fraud—exploiting the same loophole until it’s been closed. Until the risk team can identify the new threat and implement a protective measure within their fraud prevention software, fraudsters can continue to take advantage of the organization, making it exceedingly hard for organizations to clamp down on new and emerging fraud threats.
Reduced Efficiency + Drained Resources
Alert backlogs can be overwhelming for teams and individuals responsible for managing and investigating such notifications.
First off, an accumulation of alerts is typically a sign that your risk and compliance team isn’t operating at peak efficiency—the solution typically involves hiring more staff to address the workload your team is facing or adopting alert handling solutions that help your team manage these alerts more effectively.
The problem is, it’s hard to catch up once the alerts pile up. With staff struggling to meet their minimum requirements, they are often overworked and overwhelmed. Over time, this will put significant strain on team members, leading to decreased productivity and reduced efficiency. More importantly, organizations need to assign more staff to handle this backlog—resources that could be diverted to more important tasks.
With risk and compliance solutions, teams can streamline case management and ensure cases are escalated to the most experienced compliance analyst—increasing overall efficiency and stopping alert backlogs from happening.
Failure to Meet Regulatory Requirements
Organizations that accrue a backlog of alerts run the risk of falling short of regulatory requirements—leading to fines and penalties as a result of non-compliance.
Since Suspicious Activity Reports (SARs) must be filed within 30 days of identifying suspicious activity, backlogs make it challenging for organizations to meet these deadlines. The more time professionals spend filing SARs, the less time they have to investigate cases and clear the backlog. Conversely, if team members attempt to clear the backlog, SARs—and other regulatory compliance efforts—could be missed or delayed, potentially exposing the company to further breaches and liability.
Poor Data Quality
In most cases, teams are only as good as their data—it’s incredibly challenging to identify weak points and make meaningful, constructive changes without reliable, accurate data to build off.
Poor data quality means that alerts aren’t scored properly. In turn, suspicious activity isn’t prioritized correctly. Cases take too long to get through the workflow—or could be missed altogether. Worst of all, without the right data, teams cannot identify their biggest threats—and the weaknesses in the system that allow these threats to continue.
Teams are left unable to understand the real fraud threats their organizations are facing—and are unable to adapt to handle them appropriately. This means that teams aren’t just struggling to manage alerts, but the problem is steadily growing in the meantime. Ultimately, risk and compliance teams are unable to make informed decisions on what should be done to prevent fraud losses and clear the backlog of alerts.
Generally, mitigating the negative impact of alert backlogs involves efficiently managing alert processes, prioritizing alerts based on their severity and urgency, and investing in robust monitoring systems that monitor transactions and events in a timely manner.
Clear Alert Backlogs with Unit21
Alert backlogs are a major problem for organizations—they result in missed cases, make it more difficult to meet regulatory requirements, and mean suspicious activity is being left uninvestigated. While alerts pile up, fraud is going unaddressed—and is able to flourish because of the inability to address it.
Risk and compliance teams should use an alert scoring system to score suspicious activity based on the risk-level. Leverage Case Management and Transaction Monitoring to streamline operations and prevent alert backlogs from happening in the first place.
Schedule a demo today to learn how Unit21’s risk and compliance infrastructure can help your team effectively manage alerts.