Targeted monitoring exercises yield valuable insights into potential improvements in Bank Secrecy Act (BSA) and AML practices. Exploring targeted monitoring approaches and implementing program-level changes can enhance the effectiveness of identifying suspicious activities. In this regard, large financial services organizations are focused on three areas for growth:
- Customer segmentation
- Categorizing SAR data
- Strong relationships with regulators and law enforcement
Customer segmentation helps financial services organizations monitor and analyze their customers’ transactions through a finely tuned lens. Using data analysis, organizations can categorize their customers into distinct segments based on various attributes such as customer type, risk level, and transaction pattern. Segmentation enables organizations to tailor their monitoring more effectively by establishing unique monitoring thresholds for each segment. They can swiftly detect unusual or potentially suspicious activities specific to a particular customer group, thus reducing false positives and streamlining their BSA/AML efforts.
The review of SAR filing rationales can help organizations identify emerging risks by establishing connections between SAR filings and the specific typologies that triggered the alerts. This review can take many forms, ranging from requiring analysts to select a predefined drop-down category within the SAR form to using natural language processing1 (NLP) to identify common themes within the narrative field. By identifying commonalities among SAR filings, organizations can better align their customer risk rating methodologies, customer segmentation, and transaction monitoring rules to their specific risk profiles. Overall, SARs can provide detail and insight into AML monitoring, and organizations are becoming increasingly aware of these metrics.
Additionally, prioritizing an open and collaborative relationship with regulators and law enforcement can significantly enhance organizations’ abilities to stay informed about emerging red flags. The tendencies that regulators see across the field have helped many financial services organizations turn the lens on their own customers and transactional data to identify if they, too, are at risk for possible missed activity. Large financial services organizations are executing targeted custom monitoring queries based on feedback of emerging risks from regulators and law enforcement as a secondary measure of suspicious activity identification.
Regulators are not the only source of beneficial information. Many organizations also rely on different news outlets, peer groups, or industry professionals. This information gathering helps organizations remain up to date with emerging and evolving regulations by allowing for a more targeted approach to AML program changes. It also highlights the importance of determining which outlets organizations might deem as AML regulatory leaders.
