What is anti-money laundering (AML) software?
Anti-money laundering (AML) software is any computer program that enables a business to identify and report suspicious financial activity that could be an attempt at money laundering. Typically, AML software performs transaction monitoring against a set of predefined rules. For example, if there is a repeated transaction between two parties that is just under the mandatory reporting limit, this could be an example of “structuring”, or the attempt to avoid bank scrutiny by breaking up payments into smaller amounts.
Any business that processes financial transactions between two parties is a potential target for money laundering and needs an AML solution. And since money laundering supports terrorist financing, drug dealing, and human trafficking, no reputable business wants to be a part of this activity.
This is why the Bank Secrecy Act (BSA) and the Financial Action Task Force (FATF) have established regulations, guidance, and best practices for a risk-based approach. For example, they require financial institutions to have AML transaction monitoring systems. These anti-money laundering laws combat money laundering. And they make the financial system safer in the United States and beyond.
How does AML software work?
Advanced AML platforms use machine learning (ML) to detect patterns in suspicious activity and fine-tune tune their rules over time. This approach reduces the number of false positives, which can be a very costly and time-consuming burden on compliance departments.
Traditional AML transaction monitoring systems often caused up to 99% false positives. This means that analysts spent their days clearing legitimate activity. As a result, they frequently missed actual criminal activity.
Additionally, the best AML solutions use new online data sources to help identify criminal activity. For example, it should make sure a property’s rental price is consistent with similar properties in the same area. Also, it should display a picture of the building at the listed address to make sure the property is actually what it says it is.
What about Suspicious Activity Reports (SARs)?
AML applications should allow financial institutions to file Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN). SAR filings require information in a very specific format. They include a narrative section, where the compliance officer writes a description of the case using strict guidelines.
Modern AML platforms make this process much easier by filling in the boilerplate information for you. The most advanced solutions even generate a first draft of the narrative. This results in greatly reducing the time it takes to report suspicious activity.
How do I choose an anti-money laundering solution?
To get started, check out our article 10 Steps to Choosing the Right Compliance Solution. In summary, if you’re looking for a feature-rich, zero-maintenance solution built by AML compliance experts, Beam has the best solution. Request a demo today to see how Beam can revolutionize your compliance strategy.