Integrating Fraud and AML: The Holy Grail of Compliance?

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3 March 2009
Neil Katkov
Financial institutions are overloaded with a panoply of onerous and expensive compliance regulations, from Basel II to IAS to BCP (one might also mention an overload of acronyms). The anti-money laundering (AML) programs required by regulators in the US and many other countries is a particular headache. Banks have invested many millions of dollars in AML technology alone, not to mention the personnel costs for the compliance teams and front-office staff training. Naturally, this has got banks to thinking about ways they can leverage this investment in compliance. One way forward could be to integrate their AML and anti-fraud efforts. Banks complain a lot about the burden of AML compliance. But at the same time, they invest in and build anti-fraud systems (really not much different in kind than AML systems) quite willingly, since they naturally want to stoppeople from stealing money from them. In other words, anti-fraud is a business activity, with direct benefits to a bank’s bottom line. By combining anti-fraud and AML systems, therefore, banks could potentially get a business benefit from the "AML burden." Indeed, a number of banks are moving in this direction, beginning with combining their faud and AML departments. A smaller number have started to integrate the technology systems as well. Software vendors have for some years promoted the idea of using one technology platform (theirs, of course) for both AML and anti-fraud. In particular, a number of the larger AML vendors have developed anti-fraud products using their core behavior detection technologies. This potentially holds out the promise for banks of a sort of compliance holy grail: leveraging the compliance investment in AML for their anti-fraud efforts, and producing some tangible business results from the investment.

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