Take a human-led and tech-powered approach to financial crime compliance

Harness analytics to combat financial crime risks

Blog
5 minute read
November 25, 2024

Partner, National Financial Crime Practice Leader and Financial Crime Managed Services Leader, PwC Canada

Financial institutions are confronting a changing regulatory landscape. Recent enforcement actions across North America continue to highlight potential industry-wide concerns surrounding the adequacy and strength of organizations’ anti-money laundering programs.

The challenge is daunting: institutions have a clear need for increased monitoring activities across transaction, screening and due diligence activities, all the while facing economic headwinds that continue to pressure available resources. New regulatory reporting requirements north and south of the border only add to the workload.

Traditional tactics, such as hiring more staff or external contractors, can provide temporary relief. But they often leave organizations vulnerable to future backlogs.

Modernizing your financial crime risk management program

Institutions that apply analytics across their data and operations can take a more strategic approach. These tools help financial crime practitioners develop more effective operational approaches and remediation plans, which ultimately create efficiencies across their teams.

At the same time, organizations also have a powerful opportunity to apply the insights generated by analytics tools to their business-as-usual processes. We’ve worked with institutions that reduced the number of alerts generated by more than 25% on average by fine-tuning their rules. We’ve also seen organizations create more sophisticated alert-scoring frameworks that let their teams fast-close more than 80% of alerts on average before they’re escalated to a material review by financial intelligence units.

Operational analytics are powerful tools that help modernize your financial crime risk management program—creating better customer experiences, enhancing operational efficiency and strengthening regulatory compliance.

Transforming your backlog risks into an opportunity

Two primary factors cause backlogs: an excessive volume of alerts and insufficient personnel to address them. Analytics tools can transform this challenge into an opportunity by providing insights that prevent future backlogs.

This process begins with gathering the right data. For transaction monitoring alerts, you'll need detailed information on the underlying transactions and associated metadata—such as the timing, parties involved, methods used and products involved. Basic know-your-client (KYC) information, including customers’ occupations, locations and names, is also crucial. By combining these data points, you can pinpoint patterns that highlight what triggered the alerts and assess their risk levels.

At the same time, it’s helpful to collect data from your investigations unit about how long it takes to process different alert types. Overlaying this information lets you consider both the risk profile and the complexity of each alert.

Unlocking operational efficiencies

Analyzing these combined data points produces a schedule of alerts, cases and clients that are prioritized based on risk profile, complexity, alert type and other factors. This can form the basis of a production or remediation plan that balances an organization’s risk appetite and available resources, including consideration of employees’ skillsets, ramp-up and upskilling needs. For example, institutions can assign more junior analysts to simpler alerts before they move on to more complex files. Additionally, organizations can tailor training programs using insights gained from analyzing alert types and their complexities.

Financial institutions can also segregate analysts into teams specializing in specific alert types, such as those from high-risk clients in specific business sectors. For example, teams dedicated to corporate customers can familiarize themselves with patterns in the inflow and outflow of funds, such as payroll, and expedite alert review.

This prioritized remediation plan can also reduce customer friction if contacting clients becomes necessary. For example, you can organize and sequence requests for information—such as missing KYC data or confirmation of an income source—sent to customers, helping you focus on enhancing their experiences with your organization.

Accelerating business outcomes

We’ve seen powerful outcomes when organizations incorporate operational analytics as part of a broader effort to modernize their financial crime risk management program. We recently worked with a financial institution and took a multi-faceted approach that started with our financial crime analytics specialists analyzing and tuning the institution’s transaction monitoring rule sets. We then brought in our financial crime managed services team. This was more than an outsourcing or staff augmentation arrangement: it was an opportunity to modernize operating models, processes and digital solutions by delivering defined business outcomes.

This holistic approach helped us apply rules to filter through millions of transaction records and achieve an alert ratio that meets or exceeds industry benchmarks. We then prioritized alerts for different levels of review using analytics—ultimately ending with a manageable number of suspicious transaction alert filings. This addressed the immediate challenge of clearing the backlog, significantly lowered the number of alerts to be worked in the backlog and helped prevent it from reappearing.

Enhancing efficiency, effectiveness and customer experiences

Investing in analytics helps financial institutions enhance the efficiency and effectiveness of their financial crime risk management programs. These tools streamline the process of adjudicating alerts in ways that limit the impact on customers and yield insights that help organizations fine-tune their transaction monitoring rules and criteria.

This proactive approach helps avoid backlogs. Importantly, it lets financial institutions swiftly spot and report suspicious transactions—building trust with regulators, strengthening compliance and preventing criminals from abusing our financial system.

An outside perspective can help

Learn how a human-led and tech-powered approach can help you reimagine financial crime risk management

Insights (required)

Use a Collection component (simple) to display the most relevant content associated with this topic. Strongly recommended to display no more than 4 cards. Intro paragraph is optional here and should be no more than 300 characters.

Prompting user to take action

Webtile/Call-to-action (CTA)

Learn more

Industry/Service pages

Use a Secondary Nav component to showcase industry/service pages that are relevant to the topic. It should be placed closer to the bottom of the page as an additional resource in case user wanted to explore more content. An intro paragraph is optional and should be no more than 300 characters.