A new report from Boston-based research firm Celent looked at how continuously evolving regulations, coupled with recent instances of money laundering rule violations, have led to the need for better technology in managing AML operations.
In the report titled, "Emerging Solutions in Anti-Money Laundering Technology," Celent discussed a number of innovative solutions in the AML/Know Your Customer (KYC) space. Faced with pressures from growing compliance requirements and the need to cut costs, financial institutions are seeking technology that increases efficiency and frees up resources, Celent said.
According to the report, the need to ensure enterprise-wide compliance is giving rise to the centralization and standardization of AML operations, and the integration of AML and anti-fraud programs. To capitalize on these trends, solutions are emerging to address complete client lifecycle management functions across different lines of business; in particular, the KYC function is receiving a lot of attention from both banks and service providers.
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"Solutions are being developed that will parse large volumes of unstructured data from different sources with analysis capabilities that are not usually supported by rule-based methods followed by traditional AML software," Arin Ray, an analyst with Celent's Securities & Investments practice and the author of the report, said. "One issue that is still at an idea generation stage is cybersecurity. With growing instances of cyber fraud, it is likely that a few solutions will eventually enable financial institutions to strengthen and better manage their cybersecurity."
Risk and compliance is an area that financial institutions have traditionally preferred to keep in-house. However, the delivery model for AML solutions is poised for evolution, according to Celent. As financial institutions show more openness to using outsourced and managed service solutions, this area is witnessing the emergence of new solutions.
The FFIEC's recommendations in its new guidance include ensuring Bank Secrecy Act/Anti-Money Laundering (BSA/AML) staff is involved with all new product deployments as well as the review or termination of customer relationships. The FFIEC also said it expects financial institutions to take reasonable and prudent steps to combat money laundering and terrorist financing, and to minimize their vulnerability to risks associated with such activities.
Regulators are also pushing for more monitoring of ACH transactions because criminals know that a small institution's resistance may not be as sophisticated as a larger financial institution's.
This is the fourth in a series of Celent reports covering the current state of the AML technology market.
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Roy Urrico
Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).
