Top 9 Steps for Effective AML Investigation

There are multiple cases of money laundering and financial misconduct. Suppose a scenario where a large amount of money.

• Moves Silently, through the financial system
• Bypasses existing regulations
• Crosses borders repeatedly
• Operates below the radar

In such a case, these unlawful gains may seem authentic, but in reality, they’re mostly interlinked with crimes such as money laundering or drug trafficking.

The rise of payment-related crime has increased pressure on the financial sector to pay attention to its fraud detection and prevention practices, particularly when it comes to money laundering. This is where AML investigations come into play.

AML investigations are a set of actions and processes used to examine, detect, and flag suspicious behaviors.

Those working in a financial institution must have knowledge of how to manage AML investigations.

This is crucial in protecting their organization’s reputation, adhering to standards, and ultimately maintaining a secure and clean financial system.

Let’s explore further to see how AML investigations in financial institutions are playing an important role in obstructing, scrutinizing, and prosecuting financial crimes.

What is an AML Investigation?

Anti-Money Laundering (AML) investigation is a multi-phase procedure used by financial institutions to detect, stop, and fight criminal conduct related to money laundering, terrorism funding, and other related issues.

Financial institutions rely on this systematic process to analyze transactions and customer activity to combat money laundering and other financial crimes.

This includes the comprehensive evaluation of financial transactions, tracking client activities, and verifying relevant information to detect anomalies, suspicious patterns, and origins of illicit capital.

The core purpose of an AML investigation is to make it harder for criminal networks to operate. It enforces compliance with anti-money laundering laws and ensures financial stability.

Different laws, such as

• The Bank Secrecy Act (BSA)
• UK Money Laundering Regulations 2017

guide financial businesses in implementing AML programs within their systems, which automate the tracking of suspicious transactions.

AML investigation will only be conducted when a transaction is flagged as suspicious. This action is taken to gather more facts about that customer and transaction, which determines whether the activity should be reported to the authorities or not.

While there may not be any distinct AML Investigation software, AML data and transactions screening tools help in the process, such as;

• Regularly screen customer profiles
• Assess the risk status of the customer
• Analyze transaction patterns
• Investigate links to high-risk entities
• Check facts against public records
• Check against warnings, regulatory enforcements, and criminal watchlists

What is AML Case Management?

AML case management is the process by which financial institutions conduct inquiries into possible financial crimes or money laundering. It ensures that every case is carefully examined, precisely recorded, and reported following legal specifications.

Furthermore, it facilitates the improvement of AML programs by providing insightful data analysis.

Steps Involved in the AML Investigation Process

As discussed above, an AML investigation involves different steps. Each step helps identify and trace suspicious transactions and detect potential money laundering.

The steps involved in a successful AML investigation process are:

• Alert Triggering

The first step of an AML investigation starts with an alert generation on the account. These alerts may be triggered by internal reviews, ongoing monitoring systems detecting unusual activity, such as transactions exceeding predefined thresholds, or observable suspicious customer behavior.

• Alert Validation and Initial Assessment

In the next step, the red flag that triggers the alert is checked to determine its validity.

• A positive answer means that the alert is deemed potentially suspicious or relevant based on initial AML checks, and the case proceeds to the investigation stage.
• A negative answer indicates that the alert is not considered suspicious, such as being the result of a known false positive scenario, and is therefore dismissed.

• Case Development and Review

Further, a case is built from the series of alerts generated for the same account. An investigator is then appointed to review the case to evaluate its severity and risk exposure.

• Customer Data Collection

The next step involves collecting customer details. This data may be available in existing datasets. If the warning requires extra attention, investigators do additional CDD to obtain more information about the customer or business involved.

Enhanced Due Diligence may be necessary in certain instances, particularly for high-risk customers such as Politically Exposed Persons.

• Customer Risk Assessment

Moving forward, this step is to identify the risks posed by customers in order to hinder terrorist financing and money laundering. This risk assessment refers to the implementation of  risk-based approaches to customer due diligence (CDD), monitoring, and reporting. It allows to allocate compliance resources effectively.

• Transaction Monitoring

This step includes a comprehensive breakdown of the transactions made through the account. The investigators search for any existing suspicious patterns, anomalies, and unusual client behaviors. Additionally, at this stage, go through detailed research on the client’s full financial history and footprint.

• Suspicious Activity Reporting (SAR)

The next step focuses on evaluating whether there are reasonable grounds to suspect any finamcial misconduct or money laundering in an account. If there are such grounds, a Suspicious Activity Report is filed with the relevant regulatory bodies.

• Record Keeping

In this step, once the money laundering investigation process is complete, the gathered data is then stored as a portfolio of the particular customer. This helps make future investigations more convenient if a similar alert is triggered.

• Ongoing Monitoring

In the final step of the AML investigation, investigators ensure continuous monitoring and screening of client or transactions to prevent future crimes. With these, financial businesses can save themselves from unprecedented dangers and can make informed decisions.

Elevate Your Compliance Game with AML Watcher

Financial sectors struggle with increasing false positives and outdated evaluation strategies, resulting in slower investigations and a heightened vulnerability to compliance breaches.

AML Watcher supports an extensive overview of consumer data, investigation cases, audit trails, and risk-based monitoring through intelligent, automatic, and customized workflows.

It empowers businesses with countinous transaction monitoring and automated screening covering  100,000+ global data sources, integrating an effective AML case management system that simplifies collaborative investigations and the decision-making process.

Our case management tools enable the investigators to organize, track, and collaborate on cases more effectively, ensuring the swift handling of high-risk scenarios.

So what are you waiting for?