Anti Money Laundering Case Study

PROCESSES OF Anti-Money Laundering

In order to fight against the Money Laundering banks perform important operations during their regular banking operations. Because of the relevancy of the issue, the processes of anti-money laundering have taken place almost in all phases and/or operations of the banks. The key components of AML programs at financial institutions can be named as Customer Screening, Payment Screening and Transaction monitoring.

Customer Screening: New and existing clients are required to be checked against government or regulator issued, third party-provided, and internal watchlists to check for connections with dubious or blacklisted entities. Regulatory watchlists are simpler to check against, but other lists can be longer

Team size of the bottom half of the banks in the developed markets can be up to 75, while the next quartile of banks can have up to 150 people in their KYC-AML teams. Team size at some of the largest tier 1 banks can be much higher, typically 1,000 or more at major global institutions.2

Some of the large tier 1 banks had to recently hire thousands of compliance personnel to comply with regulatory requirements and consent orders. Compliance divisions across banks have been growing in size in recent years, with some banks’ compliance team growing 5 to 10 times in the last 10 years. Banks need to rethink their technology and operations to stem the growing dependence on manual efforts.

Time and Effort Spent

One of the key reasons for the large team size requirements is the need for high manual efforts, particularly in the alert investigation and due diligence process. Heavy reliance on manual efforts prolongs the time needed to conduct several steps in the process. Time requirements can also vary greatly depending on the nature and risk profile of clients as well as level of scrutiny

An average retail client file can take up 2.6 hours of analyst’s time on average, whereas for commercial and corporate clients it goes up to 10.2 and 15.3 hours respectively, due to higher complexities and risks associated with onboarding commercial and corporate entities. Ongoing customer screening is also time-consuming; the first level screening takes less time per file (1 minute on average) but throws up much more volume (352 files per day on average). As the screening level rises, volume comes down progressively, but time for reviewing each file goes up significantly; thus level 2 screening takes 15.4 minutes per file on average, but level 3 screening takes 30.7 minutes per file on