Fraud and Anti-Money Laundering (AML) Operations

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In many financial organizations, the Anti-Money Laundering (AML) and Fraud teams operate independently.

Typically, the AML team is headed by a Chief Compliance Officer, while the anti-fraud efforts are overseen by a Chief Risk Officer. These teams traditionally perceive their objectives as distinct, despite the fact that they engage in similar tasks such as identifying suspicious patterns, investigating system-generated alerts, and uncovering criminal activity.

However, there is a growing recognition of the close relationship between fraud and money laundering, leading to the emergence of a combined approach known as FRAML (Fraud + AML). This approach acknowledges the increasing interconnectedness of fraud and money laundering activities.

We explore what FRAML is, how organizations can benefit, and how companies can adopt a FRAML approach to their operations.

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What is FRAML?

FRAML stands for “Fraud and Anti-Money Laundering” and represents a new way of looking at the interconnectedness of these two operations. This approach emphasizes a collaborative approach to handling both fraud and anti-money laundering efforts to better address regulatory compliance and security.

By adopting the FRAML approach, financial institutions can address both fraud and money laundering in a more comprehensive and holistic manner. It enables organizations to leverage synergies between these two areas and enhance their efforts to combat financial crimes effectively.

Fraud management teams and AML teams have three main objectives in common:

  • Finding and addressing suspicious anomalous transactions
  • Shielding customers and organizations from financial crime
  • Maintaining regulatory compliance

There is a major opportunity for fraud and AML teams to align with these shared objectives. Both teams can share customer data—using a unified system to collaborate and share cases, while independently doing their own analyses.

Benefits of the FRAML Approach

For financial organizations, there are major benefits to using a FRAML approach:

  • Use Data More Effectively: Siloing data to a single team means both fraud and AML professionals aren’t getting the full picture of the customer or their behavior. With fraud and AML teams working in unison, they can leverage data for greater insights and can make faster, more precise decisions about suspicious activity.
  • Avoid Duplicate Investigations: When AML and fraud efforts are siloed to their own teams, professionals often end up inadvertently duplicating investigations, costing the organization time and money. With a FRAML approach, investigations are streamlined and duplicate investigations are avoided.
  • Cost Savings: Bringing these two teams into operational alignment is more cost-effective than having two disparate teams. Data can be leveraged more effectively, duplicate investigations can be avoided, and overall productivity can be significantly increased.
  • Shift From a Reactive to Proactive Approach: When companies silo fraud and AML efforts, most teams are stuck simply detecting fraud and barely meeting AML compliance guidelines. When they look at fraud and AML together, teams can shift from being reactively detecting fraud to proactively preventing fraud.
  • More Visibility into Financial Crime: When the fraud management and AML teams work using the same tool, they get a broader and deeper perspective of the threats the organization faces. A holistic approach to fraud and AML means leveraging data in a single place to visualize all suspicious activity.
  • New Capabilities for Both Fraud and AML Teams: When fraud and AML teams share their tools, they empower one another and can collaborate on cases. Fraud teams may discover anomalous transactions that may need to be flagged for AML, and vice versa. By combatting both fraud and AML together, teams can utilize tactics that work in both areas for increased productivity.

Steps Toward FRAML Adoption

To adopt a FRAML approach, organizations must consider the following steps:

  • Assess Current Processes: Evaluate the existing fraud detection and AML frameworks within the organization. Identify any gaps or areas where the two areas can be more effectively integrated.
  • Establish Cross-Functional Collaboration: Encourage collaboration and communication between the fraud and AML teams. Foster a culture of information sharing and joint analysis to identify common patterns and suspicious activities.
  • Shared Data and Technology: Ensure that both the fraud and AML teams have access to relevant data and technology systems. Enable the sharing of information and alerts between the two teams to enhance detection capabilities.
  • Unified Risk Assessment: Develop a unified risk assessment framework that considers both fraud and money laundering risks. This allows for a holistic evaluation of customer behavior and transactions.
  • Integrated Monitoring Systems: Implement monitoring systems that can detect both fraud and money laundering activities simultaneously. This includes deploying advanced analytics, machine learning, and AI technologies to identify complex patterns and anomalies.
  • Training and Expertise: Provide comprehensive training to employees involved in fraud and AML functions. Equip them with knowledge and skills to understand the interconnected nature of fraud and money laundering, as well as the combined FRAML approach.
  • Regulatory Compliance: Ensure that the FRAML approach aligns with relevant regulatory requirements and guidelines. Stay updated with regulatory changes related to fraud and AML to maintain compliance.
  • Continuous Improvement: Regularly evaluate the effectiveness of the FRAML approach through monitoring, analysis, and feedback loops. Identify areas for improvement and refine processes and systems accordingly.

While it is essential for financial institutions to customize the FRAML approach based on their specific business needs, risk profiles, and regulatory obligations, these steps can help your organization get started.

Seeking guidance from experienced vendors, professionals, or consultants in fraud detection and AML compliance can also be beneficial in implementing the FRAML approach effectively.

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How Unit21 Approaches FRAML

Unit21 revolutionizes the way fraud and AML teams collaborate and share data. Our unified infrastructure breaks away from the traditional focus on individual risk types and embraces holistic risk management. By recognizing that certain behaviors can indicate both fraud and AML risks, we provide a comprehensive approach to combat financial crime.

With Unit21, users have the power to configure buttons that label data, eliminating the need for complex data sharing processes. By simply tagging data with relevant labels, it becomes accessible to both fraud and AML teams, streamlining investigations and avoiding duplication efforts.

Our infrastructure allows you to create shared queues, enabling seamless collaboration between fraud and AML teams. By working together, teams can tackle cases more efficiently, share insights and resolve alerts faster.

To further enhance efficiencies, our infrastructure offers customizable workflows and automation capabilities. This means you can optimize your processes, reduce manual tasks, and focus on high-value activities.

Unit21 is committed to empowering organizations to work smarter, not harder. Our integrated approach, streamlined data sharing, and powerful automation tools enable you to make more informed decisions and take proactive measures against financial crime. Together, we can protect your organization and customers from fraud and money laundering, all while improving operational efficiency.

Schedule a demo today to learn how Unit21 can help you consolidate your FRAML efforts.