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AML case management: What is it, and why is it important?

Learn the most effective strategies, technologies, and best practices for effective AML case management

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⚡ Key takeaways
  • AML case management is the process through which banks and financial institutions monitor, detect, investigate, and report suspicious customer behavior. 
  • It is the first layer of defense against financial losses — not only those directly caused by financial crimes but secondarily from the regulatory fines and sanctions that can be levied when companies fail to stop actual and potential crimes.
  • An optimal case management system is one that is robust enough to meet a company’s many AML needs but dynamic enough to adjust for changing regulatory and relevant criteria while also providing data for measuring its overall effectiveness.

At its core, effective anti-money laundering (AML) case management can make the difference between being fine and getting fined.

Consider the costly example of USAA Federal Savings Bank (USAA FSB), whose various AML-related violations of the Bank Secrecy Act (BSA) over a five-year period led to a $140 million civil fine from FinCEN and the OCC in 2022 as well as a consent order. The failures included not updating the legacy transaction monitoring system and subsequently under-testing its replacement system, which resulted in a backlog of thousands of red flag alerts. Most concerning for the regulators was that this took place during a period of significant growth and increased revenue for the bank, which primarily serves active and former members of the U.S. military and their families. Yet, during that same time, its compliance division didn’t grow.

A robust and dynamic case management system, plus the staff to oversee it, might have saved the bank from becoming a “catastrophically mismanaged organization,” its former director of compliance, Lenn Ferrer, told Compliance Week.

What is AML case management?

AML case management is the process through which banks and financial institutions monitor, detect, investigate, and report suspicious customer behavior and connected third-party activities. The process is mandated by the Bank Secrecy Act, the overarching law that combats money laundering and terrorist financing in the U.S. Banks and financial institutions are required to have methods in place to review their customers’ use of banking products, identify red flags in transactions, and investigate them for escalation or resolution.  

This case management is typically handled both by analysts and specialized software, although the industry is increasingly moving toward incorporating artificial intelligence (AI) and machine learning into their techniques.

Why is AML case management important?

AML case management is the first layer of defense against financial losses — not only those directly caused by financial crimes but secondarily from the regulatory fines and sanctions that can be levied when companies fail to stop actual and potential crimes. 

On a broader scale, making it more difficult for crimes to take place protects against the greater harm perpetuated by criminals laundering money, financing terrorism, and committing the various crimes associated with that activity, including tax fraud, illegal sales of drugs and weapons,  and even human trafficking. It also protects the larger financial system. If criminals are deterred from enough banks, they will be forced to find other methods to turn ill-gotten money into legitimate funds.

What are the steps in AML case management?

Industry-standard AML case management involves several steps, though they may look different depending on the company and its particular products, technology, customer base, and jurisdictions and their applicable laws.

  1. All AML case management programs start with a Know Your Customer (KYC) program to ensure that all rules are followed in the customer selection and onboarding process, including screening for AML risk and that the institution is aware of the type and scope of the activity for which its financial products will be used.
  2. Transaction monitoring is the linchpin of AML case management since it identifies suspicious activity that could be a metaphorical bread crumb of illegal activity. Reliable knowledge of money laundering trends, geopolitics, and cultural norms should be used appropriately to inform the settings of a company’s transaction monitoring system. For example, an increase in large cash withdrawals and deposits should be expected in Asian-dominant locations during Lunar New Year celebrations, which traditionally involve exchanges of red envelopes filled with cash. 
  3. Red flags triggered by monitoring or other internal due diligence, such as ongoing KYC processes for existing customers, are then reviewed.
  4. False positives are rejected and the remaining transactions undergo further review by analysts, who consult additional parties, such as relationship managers, as well as transaction histories and comparable clients.
  5. If a validated event is discovered and a case is being built, accounts may be put on hold until a resolution is reached.
  6. Finally, analysts complete suspicious activity reports (SARs) for qualifying cases and file these with respective jurisdictions and law enforcement agencies.

What is included in an AML case management system?

An optimal case management system is one that is robust enough to meet a company’s many AML needs but dynamic enough to adjust for changing regulatory and relevant criteria. In addition to being able to incorporate KYC tasks along with transaction monitoring and SARs filings, an ideal system should also be able to track the filings and measure the results of each stage and escalation to determine the system’s effectiveness.

How can you measure the effectiveness of AML case management?

Key performance indicators, or KPIs, can be used to obtain quantitative measures of results, efficiencies, retention, and costs as well as the overall impact of case management. This information helps a company determine if the program is both operationally sound and cost effective. For USAA FSB, using such metrics might have indicated that there was too high a workload for the existing staff and that it was being exacerbated by excessive unfilled roles; both are failures that were cited in the Financial Crimes Enforcement Network (FinCEN) enforcement action.

“As its customer base and revenue grew in recent years, USAA FSB willfully failed to ensure that its compliance program kept pace, resulting in millions of dollars in suspicious transactions flowing through the U.S. financial system without appropriate reporting,” wrote FinCEN’s then-Acting Director, Himamauli Das

AML KPIs

Examples of AML case management KPIs include:

Results

  • Number of SARs filed

Efficiency

  • Total alerts
  • Alerts per analyst (workload)
  • False positives
  • Monitoring scenarios

Good customer retention

  • If false positives result in frequent holds on deposits and accounts, those customers may leave

Costs vs. performance

  • Operational costs
  • Operational costs vs. overall costs with consideration for the number of false positives

Improve your AML case management system today

Companies would be wise to learn from USAA FSB’s failure to improve its program when it had the opportunity during its heady days. “Growth and compliance must be paired,” Das continued, “and AML program deficiencies, especially deficiencies identified by federal regulators, must be promptly and effectively addressed.”

Companies looking to shore up their AML case management should weigh effectiveness with efficiency. AI’s ability to “learn” from data could end up being one of the best tools for companies seeking to increase their responsiveness to patterns and trends while also reducing the number of false positives.

“This is the approach we need to be taking to AML case management,” noted Frank Holzenthal, formerly with FICO, the analytics company, “to improve results while reducing the amount of time and investigators needed to review high volumes of false positives.”

How Persona can help with AML case management

Here at Persona, we understand that case management is a complex process with no room for costly errors or oversight. Your KYC/AML process will change based on a variety of factors, which makes our suite of configurable, flexible identity solutions ideal for meeting your business needs and risk tolerance. You can use progressive risk segmentation to serve different flows to different customers based on how much risk you detect in real time. Cases, our fully configurable hub, allows you to consolidate data and customize case views while simultaneously protecting sensitive information. 

At Branch, a fintech firm offering instant payments and fee-free financial services, speed is part of the brand. By building out Cases with guidance prompts for analysts and spotlighting automated information inputs, their fraud team is now able to resolve escalations in a matter of hours, instead of days or weeks. 

Case study
Branch unites KYB + KYC to onboard businesses quickly

Removing bottlenecks and operational burdens can empower your staff and increase collaboration when it matters most. Let us help you focus on the mission-critical task of protecting your customers and your company.

Interested in learning more? Start for free or get a demo today.

Frequently asked questions

What is the role of an AML case manager?

An AML case manager manages the review of a suspicious activity alert, either for the duration of the review or for a portion of it, such as the investigation, escalation to key parties, decisioning, and eventual determination as a false positive or through the completion and filing of the SAR. They typically use a combination of systemic and manual reviews.

How does automation play a role in AML case management?

Automation can greatly improve the effectiveness and efficiency of AML case management, including by reducing the number of time-consuming false positives through its ability to “learn” by adapting to patterns over time. For example, through the automation at the core of Persona’s Workflows product, customers can use built-in logic to approve, deny, or escalate hits for manual reviews. 

How can my organization implement an effective AML case management program?

An effective AML case management program should be able to meet the minimum requirements of a program, including elements of KYC, transaction monitoring, and the creation of SARs, as well as be adaptable to changing compliance needs and conditions or trends. It should also be able to offer KPI data to help a company measure its overall effectiveness. 

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