With the need for sophisticated fraud detection capabilities and current state of outdated AML system many banks have combined Real-time Enterprise Fraud Management and AML platform, which is indeed an idea whose time has come. Few banks have already begun their journey on this front and we expect more banks to join the bandwagon.

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Anti-Fraud and Anti-Money Laundering in Banking- The Common Denominators
CustomerXPs

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Bank fraud and money laundering are on the rise
all across the world. Some top banking firms have
lost over several billion dollars last year, owing to
high-profile money laundering cases. In spite of
this sudden surge, a third of executives think that
their transaction monitoring systems are neither
efficient nor effective, according to a recent
survey from KPMG. With such large money at
stake, banks are striving hard to establish a
counter-mechanism to stop money laundering.
We too have been hearing from multiple banks on
their plans to align the anti-fraud and anti-money
laundering efforts within their organizations. Over
the past few years we have seen many
manifestations of sophisticated fraudsters and
money launderers across the globe that is making
bankers re-think their strategy and execution to
curb these attempts. Clearly fraud and money
laundering risks are the key containment areas for
operational risk management within a bank.
Their implications are similar from perspectives of
legal risks, reputational risks and financial losses.
The need for real-time fraud monitoring of
banking transactions across the enterprise is well
established and many banks are catching up to
move from traditional methods to advanced real-
time fraud monitoring systems. But many banks
are still thriving on old generation anti-money
laundering systems which only can perform offline
transaction monitoring by taking the transaction
data from core systems offline or in batch mode.
Also, there is a lacuna with these systems from
agility and flexibility perspective for changes
required with the changing times and the
regulatory mandates.

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Need for real-time transaction
monitoring in AML capabilities
With the advancements in operational systems
and technology for faster, rather, real-time
payments & remittances and the rise of multi-
channel banking, the money launderers in this
digital era need less than an hour or few hours at
the maximum to complete the three key steps of
money laundering process: Placement –placing
the illegal money into the system; Layering -
separating illegal money from the source through
a series of transactions and making it difficult to
trace the origin; and Integration- converting the
illegal money to legitimate form. This further
accentuates the need for real-time monitoring
capabilities for detection of suspicious
transactions and effectively combating money
launderers. Majority of the banks across the globe
are not well-equipped with real-time suspicious
transaction monitoring in their AML systems and
this is one area banks need to gear up.
KPMG recently released a report on Global Anti-
Money Laundering 2014, based on a survey of
over 300 AML professionals from 48 countries
around the world. As per the report:-
 Know-Your-Customer continues to be an
area of concern, with 70 percent of
respondents stating that they had been
subject to a regulatory visit focusing on
this area. Regulatory investigations have
frequently drawn attention to significant
gaps in the KYC information maintained
by financial institutions
 88% of AML & compliance professionals
quizzed by KPMG said that establishing a
counter-mechanism to stop money
laundering was back at the top of their
firms' agenda
 Regulatory approach was ranked as the
top AML concern, with 65 percent of
respondents stating that regulatory visits
were AML personnel’s primary concern.
84 percent of respondents stated that the
pace and impact of regulatory changes
were significant challenges to their
operations
 Transaction monitoring systems continue
to represent the greatest area of AML
spending, while satisfaction for these
systems has declined with an average
score of 3.42 out of 5 with regards to
efficiency and effectiveness. Only 58
percent of respondents stated that their
organization’s transaction monitoring
system was able to monitor transactions
across different businesses. This was a
significant increase over the last few
years owing to complying with growing
regulatory expectations

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Given this context, there is an opportunity for banks to align their anti-fraud and anti-money laundering
efforts with an integrated approach. Here are the key aspects of alignment of anti-fraud and anti-money
laundering efforts in a bank.

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Operational Processes and people
Both anti-fraud and anti-money laundering
departments of the bank need dedicated
investigation teams who investigate each
case/alert that systems generate based on the
severity level and category of the alert as per the
defined processes of the bank. The nature of
business has become such that these investigation
teams need to operate on a continuous basis and
even 24/7 depending on how the fraud processes
are configured. Both these teams need similar
investigation tools for completing the
investigation workflows and finding the evidences
in order to resolve cases. It makes sense for the
banks to optimize the efforts of investigation
teams by having combined AML and fraud
investigation under single umbrella.
IT Platform
Real-time transaction monitoring, integrated case
management and comprehensive investigation
workbench are the common basic build blocks of
both fraud management and anti-money
laundering systems. If both fraud management
and AML are done using single platform, banks
will have huge benefits in terms of capital and
operational expenditure. This would lead to
significant benefits in terms of total cost of
ownership (TCO).
Data
Data Integration is one challenging area for banks.
Both fraud management and AML systems need
the integration with the same host systems (core
banking system, credit cards etc.) for the
corresponding transactional data and master data.
If there is a single platform, that can handle real-
time integration with host systems for getting the
events from the host systems and use the same
both fraud management and AML purposes, this
could be hugely beneficial for the bank.

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Conclusion
With the need for sophisticated fraud detection capabilities and current state of outdated AML system many banks have
combined Real-time Enterprise Fraud Management and AML platform, which is indeed an idea whose time has come. Few
banks have already begun their journey on this front and we expect more banks to join the bandwagon.

7. www.customerxps.com | clari5@customerxps.com | +91-80-3221-8309
About Us
CustomerXPs, a Red Herring Asia Top 100 winner, is a Software
product Company that creates real-time, intelligent products that
empower Banking, Retail and Telecom Enterprises with instant
insights enabling influenced outcomes of deeper customer
engagement and fraud-free transactions. With a vision to provide
ammunition to its clients to delight their customers even before
they could articulate their needs/wants, CustomerXPs software
identifies and solves, in real-time, complex problems in the areas of
customer experience management, contextual right-sell, fraud
monitoring, compliance, accurately predicting risk and automating
targeted treatments.
Jayaprakash Kavala is the Head of Product Management at CustomerXPs. He can
be reached at jayaprakash@customerxps.com. For more information on
Enterprise Fraud Management and Anti-Money Laundering solution, please write
to us at clari5@customerxps.com or visit us at www.customerxps.com
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