Money laundering, terrorist financing, and other forms of financial crime are often “bogeymen” words to banking staff, especially those who hail from mid-sized institutions. Oftentimes, when any of these terms is mentioned, it’s in the context of fear-mongering. Of course, there’s good reason for banks to regard these issues with a healthy and realistic amount of fear. After all, banks of any size can fall prey to nefarious activities—which means that smaller banks shouldn’t let down their guard.
As far as these issues are concerned, the banking industry’s stance is that you can never be too careful. But perhaps carefulness isn’t the only thing that should factor into a bank’s approach to anti-money laundering, or AML. Mid-sized banks in particular may benefit from a more creative outlook on the issue of financial crime prevention, one that goes beyond reactive methodologies and compliance just for the sake of.
If you’re from a mid-sized bank and you want to adopt an AML investigation approach that’s profitable as well as effective, this is your chance to flip the script. Instead of following banking industry trends to the tee and being overly fearful on the issue of financial crime, turn your AML, customer due diligence (CDD), and know your customer (KYC) protocols into competitive strengths for your company. Here’s a quick examination of prevailing AML trends in the banking sector, plus some tips on what you can do to push the envelope.
Use Data to Strike a Balance in AML Risk Assessment
The most obvious trend that you’ll be able to perceive is the predisposition of big banks to be extra cautious of financial criminals. Again, the sentiment is warranted, given how proficient these malicious agents currently are at their game. But some of the bigger financial institutions have gone to extremes in their quest to weed out risky customers. As a consequence of their hardline and inflexible de-risking policies, these banks have ended up alienating even trustworthy clients.
This posits an interesting takeaway for your bank: that you should have an approach to AML risk assessment that’s accurate, balanced, and realistic all at the same time. This will be possible if you onboard an AML solution with enhanced capabilities for culling, processing, and interpreting both structured and unstructured customer data. The investment will enable you to do more than simply flag risk factors en masse. It will allow you to accurately determine the risky customers from the good ones and, as a result, establish lucrative business partnerships with the latter.
Streamline—And Don’t Separate—Your AML Systems After Mergers and Acquisitions
Another trend you may have noticed is the tendency for banks to retain multiple AML compliance systems after mergers or acquisitions. For many banks that have just undergone M&A deals, keeping separate systems seems like the pragmatic choice. If the merged or acquired entities will continue to operate as separate units, why is there a need to rock the boat? Won’t AML be more effective if these units can tackle compliance separately?
If your bank is fresh off of a merger or acquisition, it may actually be a better choice to go against the industry trend and push for AML consolidation instead. In the long term, it will be highly advantageous for separate units to draw from one unified system and standardize their compliance proceedings. You can eventually work at setting the bar higher for AML compliance targets, and aim for all units to become better as a collective at deriving AML insight. That could also reduce certain units’ fear of changes in AML policy and make them more excited about the possibilities that lie in new AML, CDD, and KYC technologies.
Make AML a Focal Point of the Customer Experience
Lastly, there’s been a trend among banks to put even more focus on the customer experience. But the conventional methods of doing so involve rapidly expanding product lines and spending a fortune on marketing. You can do things differently by going out of the box and putting your efforts into a new and improved AML system. Stop treading too fearfully when it comes to the issue of financial crime, and make your bank’s response to it one of your unique selling points.
Leverage your bank as an accommodating institution for new customers, but also one that puts a premium on staying free of financial crime. Rethink your customer onboarding experiences to have fewer touchpoints and simpler enrollment steps, but also stronger security measures. You should aspire for a smooth end-to-end enrollment experience that seamlessly integrates your AML, CDD, and KYC processes. Your customers will be able to see the difference in your approach for themselves, all because of a pleasant and intuitive enrollment experience that nonetheless prioritizes their safety. This will earn you their longstanding trust, as well as their willingness to spread the good word about your bank.
As illustrated in the points above, there’s a lot of potential to be leveraged in optimized AML practices. Though it’s good to stay cautious about financial crime, you can go beyond the paralyzing fear that your competitors are experiencing. Think of your AML approach as something that can actively add value to your bank, and surprise the rest of the industry with your success.
Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist, he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.