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Addressing the Anti Money Laundering Challenge: Characteristics of Successful Programs

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All eyes are on the up and up. Meaning: Federal and even state governments’ scrutiny of Anti Money Laundering (AML) and Know Your Client (KYC) initiatives at asset management firms and service providers is high. No investment firm or service provider wants to be in the front-page headlines for AML lapses. It can be costly, as in millions of dollars. And the penalties for breaches in the framework of controls and processes are going ever higher. But there’s more at stake. AML violations expose organizations to significant reputational risk.

Regulatory fines continue to rise, leading to more spend on AML.

The enhanced regulatory pressure and investigation of financial institutions has prompted a significant investment in AML processes. Complex technology has been adopted and operational expenses make up a significant portion of the AML budget. AML compliance is driving additional complexity into already complex operations.

Operations managers and service providers face a number of challenges as they strengthen their AML procedures. There are opportunities too.

Heightened regulations and escalating AML/KYC costs add complexity to a highly complex operational environment.

First the challenges:

Increased Cost. Firms are being asked to bend the cost curve at all levels. AML/KYC refresh and remediation programs tend to be expensive. These and other AML-related requirements and pressures are occurring at a low-return time in the investment industry, where firms are poised to reduce rather than raise operating costs.

Skilled Talent Shortage. Qualified professionals adept at understanding and managing AML/KYC risks are in limited supply. A lack of specialization in this discipline makes it more difficult to access these resources in low-cost locations.

Inconsistent Quality. Completeness and accuracy when obtaining KYC profiles are vital for downstream AML processes. However, overly complex and fragmented AML/KYC processes may lead to inconsistent data capture and high defect rates.

Inability to Scale. Meeting AML/KYC regulatory mandates takes up valuable time and resources. As businesses grow and take on more products from different markets/geographies, so do needs for clean processes, strong technology and specialized staff. These often conflicting demands create struggles for organizations to efficiently grow their businesses.

A proven constellation of methods and tools addresses AML/KYC challenges.

As noted, there are opportunities too. The characteristics of a successful program that strengthens AML/KYC risk mitigation include:

  • Well-Honed Organization and Definition: A sound operating model is fundamental. Achieving it requires the following: a clear objective, detailed documentation of routine processes, a proven technology solution and well-defined roles and responsibilities. Issue/risk management tools incorporated into a firm’s operating model provide quality control methods to ensure accuracy and consistency in meeting AML/KYC needs. Other key elements include: governance structure, service-level agreements (SLAs) with metrics as well as stakeholder engagement and communications plans.
  • People Enablement: In-depth training—boot camp style—in AML/KYC prepares staff to address issues and mitigate risk. AML/KYC frameworks, career plans and variable capacity models create a solid sustainable solution.
  • Scalable Processes: Operational excellence means embedding standardized AML/KYC process maps and step-by-step activities into the operating environment to drive quality improvements. Clear exception processing steps also advance quality and efficiency.
  • Technology/Tools: Automation and workflow tools enhance productivity. They institutionalize a standard, optimized and repeatable approach to managing risk. Reporting/dashboards, business process navigation and virtual collaboration tools could improve transparency and build global AML/KYC capabilities. Accenture has pioneered the use of robotics to support routine components of AML processes
  • Oversight: In scenarios where AML/KYCS is outsourced, a risk-based oversight model should be applied. It ensures service providers are delivering on requirements and are keeping current with regulatory developments and industry best practices.

In light of incidents, issues and trends on the world stage, AML/KYC scrutiny at the governmental and firm levels is understandable. Firms with the right people and tools to detect suspicious activity can offer a strong response and protect their reputations. The appropriate approach can accelerate the transition to a strategic AML/KYC service solution.

Whether performed in-house or outsourced, the need for a scalable, effective AML/KYC solution that keeps up with developments is important. Make that critical.


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