Inefficient systems and processes
AML alert investigations tend to be highly manual, and transaction monitoring systems – often originally designed for retail banking, rather than correspondent banking – can generate hundreds of thousands of alerts per month. More than 90% of these will typically be false positives, resulting in high costs and the risk that illicit transactions will be missed.
Across the industry, banks have collectively been fined billions of dollars for compliance breaches. High costs are also involved in maintaining AML compliance systems and processes: WealthInsight predicted that banks would spend $8 billion on AML monitoring in 2017.
Some domestic and regional banks use indirect structures which enable them to act as aggregators for smaller banks. These structures may involve downstream clearing or nested relationships, making it difficult for correspondent banks to monitor payment activity effectively.
It’s not always easy for banks to share information across borders, or get feedback from governments about the SARs they have filed. Collaboration is key if financial institutions are to share information and understand law enforcement’s priorities more clearly.