Insights Thought Leadership

Bridging the Gap Between Fraud Prevention and AML

Fraud Prevention and AML



Unfortunately, many bankers tend to find themselves duplicating fraud prevention efforts within their financial institution.  These bankers have long sought-after new methods that will allow them to streamline fraud prevention practices, but the legacy technologies in place aren’t always capable of facilitating these goals.

To achieve better information sharing, bankers should seek to integrate innovative fraud prevention solutions that leverage automation. With this capability, fraud prevention professionals across the organization can cross-collaborate and incorporate members of the customer support staff to better hone operations and improve customer experience. Having a better solution in place can bridge multiple areas of a financial institution, delivering new benefits to everyone involved.

Customer Service Comes at a Cost

Much of AML and BSA compliance boils down to knowing your customer. Before opening an account, banks need to be certain the prospective customer is in fact who they claim to be. Compliance officers must also solicit information to determine their likely transaction profile- is the business cash intensive? Do they regularly send or receive wires? How big are typical deposits and withdrawals?

Such information- regularly refined via ongoing transaction data once the account is opened- is essential to identifying unusual activity deserving closer scrutiny. This same information also tends to be priceless for relationship managers looking to identify the next logical product to suggest, at-risk accounts to preserve, etc. There’s certainly no need to collect this information twice- or to process it manually.

Effective compliance serves to protect the account holder as well as the bank. No financial institution wants to be defrauded, or to be cited for control lapses by its regulator. At the same time, customers look to their bank partners to protect them from nefarious activity that often lurks outside their area of expertise. The complicating factor is customers’ limited patience for minor inconveniences that enable such fraud prevention protections.

For this reason, banks will occasionally allow a questionable small-dollar transaction to process rather than risk alienating a high-value customer. It becomes a matter of weighing potential fraud exposure against lost customer equity (see our earlier blog on the customer offense rate for more on this topic). A well-informed algorithm- backed up by robust data- goes a long way toward optimizing such rapid-fire decisions.

Staying a Step Ahead of Fraudsters- and the Competition

As noted above, banks have both operational and regulatory incentives for maintaining BSA and AML compliance. Ideally these two factors would be perfectly harmonized, but sadly they are not.  It’s no secret that some regulatory mandates are deemed by bankers to be of little to no value. Conversely, the need to comply with those rules potentially crowds out the opportunity to pursue other fraud prevention/security initiatives capable of delivering greater benefits.

Compounding this frustration, the non-bank disruptors challenging banks’ traditional market position face a lighter regulatory burden, allowing them more bandwidth to innovate and optimize their customer experience/fraud prevention equation. Although a level playing field would be the most desirable answer, we believe that through data analytics banks nonetheless possess the wherewithal to adopt a more holistic view and in the process enhance customer experience and cross-sell while simultaneously mitigating fraud.  

For more information on fraud prevention, check out our recent white paper below.

Download White Paper Stop Fraud With Analytics