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AML and correspondent banking

Anti-money laundering (AML) aims to prevent criminals from using the global financial system for illicit activity. It’s an important tool in the fight against financial crime – but it’s also an area that brings major challenges, particularly for correspondent banks.

The processes involved in identifying illicit transactions are time-consuming, inefficient and often based on outdated technology. Many of the AML monitoring systems used by correspondent banks were originally developed for retail banking, so are not equipped to deal with the complexity of correspondent banking.

At the same time, although the industry is spending billions of dollars on AML – and banks are filing millions of suspicious activity reports (SARs) – very few illicit flows are blocked in practice. It’s clear that more information needs to be shared between governments and financial institutions if AML measures are to succeed in tackling financial crime.

Financial Crime Compliance in 2018
Financial Crime Compliance
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What are the challenges?

Correspondent banks face tough challenges around anti-money laundering (AML) compliance. And many banks with correspondent banking activities have seen compliance costs soar. Banks need to sift through millions of legitimate transactions processed every day to identify a few that are suspicious or illicit. This can literally be like searching for a needle in a haystack! And existing monitoring systems are just not up to the job.

  • Inefficient systems and processes
  • Mounting costs
  • Indirect structures
  • Information sharing
  • Most illicit flows are not blocked

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Banks need to overcome many problems where anti-money laundering (AML) and assurance is concerned. But what are the main challenges and how can banks use emerging RegTech solutions to close the gaps? A panel discussion at Sibos 2017 reviewed the most significant developments and explored the role collaboration can play in supporting innovation.

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The role of technology

Despite the challenges, developments in technology could make transaction monitoring and screening programmes much more effective.

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