Conducting an AML investigation

Before filing a suspicious activity report (SAR), a bank needs to conduct an AML investigation to uncover money laundering activity.

When activity that may be linked to money laundering, terrorist financing, or other crimes occurs within a financial institution, compliance regulations require them to take action. A bank can officially signal suspicious behavior to a financial intelligence unit (FIU), like FinCEN in the US, through a suspicious activity report (SAR).

Before filing a SAR, however, a bank needs to conduct an AML investigation to justify the report, tracking down all evidence of suspicious activity.

An AML investigation must be conducted quickly, since financial intelligence units impose strict deadlines for filing SARs. In the United States, banks have 30 calendar days to file a SAR, which may be extended to a maximum of 60 calendar days in certain cases. 

The AML investigation process

Usually an AML investigation starts with an alert from an automatic monitoring system. Rules-based monitoring systems are a key part of most AML solutions. They are useful for automatically screening large amounts of data and flagging transactions or other activity that could pose a risk. On the other hand, monitoring systems generate high levels of false positives: around 95% of all alerts, sometimes more. AML investigations must first verify the legitimacy of the suspicious activity. Many alerts can be quickly dismissed without having to conduct a long investigation.

If the alert appears legitimately suspicious, investigators must then gather any relevant data and information about the customer or transaction to submit to the FIU in the SAR.

Traditionally, investigators have had to do a great deal of manual work, like sorting through multiple databases to pull out relevant information. It can be time consuming - and that can be a serious challenge given the hard deadlines investigators face.

Traditional anti-money laundering investigative methods can also be inefficient and let criminal activity slip through the cracks. Since money laundering schemes and terrorist financing are designed to stay hidden, finding the right evidence can be challenging. Conducting manual investigations using traditional relational databases means going tab through tab to find the right data. It’s easy to miss important connections that paint the full picture of the crimes that might be occurring.

AML investigations with graph technology

Graph analytics is emerging as a powerful solution for AML investigations. Running queries shows investigators in a few clicks information that might have otherwise taken days or weeks to track down. And graph technology displays data in a format that shows the connections between data points, making information easy to understand at a glance.

Beyond AML regulatory compliance, efficient AML investigation tools help financial institutions do a better job of catching criminality within their organizations. Swiftly recognizing emerging patterns is essential to stop criminals in their tracks. It also creates precious information on the kind of behaviors organizations should monitor moving forward.

Tab model vs graph model for investigation

Filing a suspicious activity report

Once the investigator has gathered sufficient evidence from their AML investigation, they must decide whether the initial suspicion holds up. If it does not, the case is closed. But if it does, they submit a SAR to the FIU in the country where they are operating. After that, it’s up to the authorities to decide whether and how to criminally pursue the case.
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