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Transaction monitoring (TM) and sanctions screening systems are invaluable tools in the never-ending effort by financial institutions to detect potential money laundering activity effectively and efficiently. Many institutions invest significantly in implementing anti-money laundering (AML) technology but then fail to maximize its potential and capabilities, often leaving gaps in their compliance efforts.
The notion that AML technology can be installed with minimal customization and left to operate virtually autonomously is naïve – especially in an era of intensifying regulatory scrutiny. Without appropriate control procedures, significant operational errors can occur, including an excessive amount of false positives and false negatives (instances of money laundering that go undetected). The regulatory emphasis on detecting such instances and the increasing complexity and integration of AML technologies require internal audit (IA) to transform the way it assesses AML systems to help protect the institution.