Fundamentally, AML investigations seek to resolve the question of where money is coming from and where it goes. Examiners strive to identify, evaluate, and report all suspicious activity. The FFIEC’s overview of suspicious activity states a suspicious transaction can include a transaction that:
“has no business or apparent lawful purpose or is not the type of transaction that the particular customer would normally be expected to engage in, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.”
Understanding your customers, the counterparties they interact with, the nature of their activity and the associated risk, is crucial.
The Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing advises
“…banks to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations, in order to further strengthen the financial system against illicit financial activity.”
The modern financial system produces large amounts of data from numerous sources; investigators must navigate dozens of siloed, complex data pipelines to compile and analyze huge amounts of disparate information, thus investigation teams require innovative technologies and big data capabilities to manage counterparty information.
Counterparty enrichment and resolution can allow investigators to analyze the connections between related entities to identify relationships and better determine nefarious activity.
The Challenge with Siloed Systems
Investigations dependent on conventional systems are inefficient, often producing a high number of false positives and overburdening investigators. Working in siloed systems that require incorporating online searches and accessing third-party sources, while manually piecing together information on counterparties creates inefficiencies for investigative teams. In the absence of a single system of record, investigators have limited visibility into their customer’s activity and the counterparty risk on the other side of transactions. One third of investigative tasks focus on research into customer interactions and relationships while 60% of an investigator’s time can be spent on activities related to counterparties.
Conventional systems relying on siloed information cannot accurately represent transactions, entities or interactions nor determine if there is additional interaction with said entity. This can lead to duplication of effort by multiple investigators, researching and evaluating the same counterparty.
Innovation in Data: Holistic and Data-Driven Solutions
The Anti-Money Laundering Act of 2020 categorizes technological innovation as a priority, stating one of the six key purposes of the Act is:
“To encourage technological innovation and the adoption of new technology by financial institutions to more effectively counter money laundering and the financing of terrorism”
For investigations to be timely and effective, access to rich, resolved data is crucial. Applying a data-driven and holistic approach providing investigators with a robust picture of a customer’s activity, relationships, and interactions all within a single system of record saves time and provides valuable insights into investigations.
The Power of Counterparty Analysis
Verafin’s counterparty resolution gives investigators the ability to expedite investigations with enriched data, link analysis, and smart visualization tools. Our cross-institutional counterparty risk analysis, including transaction and entity resolution, provides insights into risk of counterparties across institutions. Joint investigations into counterparty relationships can span multiple institutions, with 314(b) information sharing enabling an investigation team to share potentially suspicious activity across institutions to strengthen investigations and expedite decision making.
Verafin has 20 years of domain-specific data experience and expertise invested into our purpose-built anti-financial crime platform. Verafin extracts counterparty data from dozens of financial systems and resolves this data to provide investigators with a holistic view of counterparty activity, including counterparty enrichment of non-customer profiles. With over 300 million resolved counterparties in the Verafin Cloud, counterparty profiles are created maintaining transactional relationships and behavioral trends. Account, demographic and financial institution information is extracted from wire, ACH, check and other rich data, to expedite alert reviews and investigations by eliminating the need for investigators to use multiple systems. Counterparty risk ratings are retained in Verafin to eliminate duplication of effort and expedite decision-making in future reviews.
To learn more about counterparty enrichment can help investigators follow the money, check out our Feature Sheet.