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Sustaining Successful AML/AFC Programs Under Reduced Budgets
Navigating budget cuts and evolving threats requires financial institutions to embrace smarter, data-centric strategies for AML/AFC compliance.
As the financial landscape continues to evolve rapidly, financial institutions worldwide are grappling with a common challenge: how to sustain effective Anti-Money Laundering (AML) and Anti-Financial Crime (AFC) programs under tightening budgets, rising workloads, increased operational costs, ongoing regulatory scrutiny and ever-evolving criminal tactics. All these factors have created a complex environment where compliance teams are consistently expected to do more with less, while at the same time, maintaining an environment wherein the business can safely grow and customer experience remains a key priority.
Insights from the LexisNexis "True Cost of Financial Crime Compliance" report reveal that the total cost of financial crime compliance for EMEA financial institutions alone has surged to $85 billion, with over 40% of the allocated costs going towards labor, highlighting the critical need for efficiency and innovation. North America closely follows EMEA with total costs of $61 billion. A 2024 report by Celent on IT and operational spending for financial crime compliance paints a similarly daunting picture, noting that “financial institutions will spend US$34.7 billion on financial crime compliance technology and US$155.3 billion on operations in 2024.”
As financial institutions plan for the remainder of 2024 and beyond, the mandate is clear: Reducing costs without compromising compliance effectiveness or negating customer experience is no longer just a goal, but a necessity.
Innovative solutions are needed that allow for a more complete picture of customers and counterparties by eliminating data silos, surfacing important connections, and enabling more dynamic monitoring and investigation. This is the basis of Quantexa’s AML/AFC platform, which empowers organizations to sustain AML/AFC programs under reduced budgets, optimizing compliance efforts, streamlining operations, and driving more value from existing resources.
Focus on your data and your decisioning
The crux of successful and future-proofed financial crime compliance lies in the data and the ability to make consistent and accurate decisions in a timely manner. Historically, many institutions have been overwhelmed or impeded by fragmented data sources, manual processes, and inefficient legacy decision-linked systems. As such, the key to sustaining AML/AFC programs on a tighter budget is harnessing the power of data analytics, AI, and machine learning to uncover insights that traditional rule-based systems and manual controls frequently miss.
Data-driven decision intelligence platforms can enhance AML/AFC programs by providing a holistic view of customers, transactions, and counterparties, enabling institutions to better understand risk at an entity level. By integrating internal and external data across silos, institutions can create a single, unified view that accelerates onboarding and offboarding decisions, reduces false positives, improves detection rates, and ultimately lowers the cost of both compliance and business operations.
For instance, using advanced data analytics to build contextual monitoring frameworks can help institutions quickly identify suspicious patterns and risk throughout the customer lifecycle from onboarding to exit, streamline processes, and reduce the need for manual intervention and data gathering—internally and externally. An automated and data-driven approach empowers compliance and business teams to allocate resources more effectively, focus on the highest risk activities and make more informed consistent decisions faster.
Boost efficiency and optimize resource allocation through risk-based prioritization
Automation is no longer a luxury; it’s a critical component of a sustainable AML/AFC strategy, especially under budget constraints. Compliance processes, such as onboarding, transaction monitoring, alert management, and case investigations, are often bogged down by repetitive and manual tasks. This inefficiency is costly and diverts skilled analysts away from more complex, value-added activities.
Resource allocation is a critical factor in the success of any AML/AFC program, particularly when budgets are constrained. To maximize impact, institutions must shift from a reactive, one-size-fits-all approach to a proactive, risk-based strategy. This involves prioritizing resources based on the level of risk associated with different customers, counterparties, products, and geographies.
Using advanced analytics, institutions can deploy entity- and network-powered risk models that dynamically adjust to new information. Quantexa’s dynamic Entity Resolution (ER) can leverage multiple unique use cases without data duplication, ingesting and resolving entities in “batches.” It leverages AI to deliver unprecedented accuracy and meaningful context, and enables increased confidence through open and fully scalable models. Utilizing clean, accurate, up-to-date data within these risk models solutions allow organizations to continuously refine their approach to monitoring and investigation. Risk-based prioritization ensures that the highest-risk alerts are addressed first, reducing the backlog of cases and enabling compliance teams to focus on the most pressing threats.
A dynamic, risk-based approach not only improves compliance effectiveness but also reduces costs by ensuring that resources are allocated where they are needed most. It’s a more strategic use of limited budgets that aligns compliance activities with the areas of greatest impact.
Foster a culture of continuous improvement and innovation
Finally, sustaining successful AML/AFC programs under reduced budgets requires a cultural shift towards continuous improvement. This means regularly reviewing and refining compliance processes, leveraging feedback from frontline analysts, and embracing a mindset of innovation and adaptability.
Institutions should establish feedback loops to identify inefficiencies, test new approaches, and refine existing models. Regular training and upskilling of compliance staff are also crucial, ensuring that teams are equipped with the latest knowledge and tools to combat financial crime effectively.
The challenge of sustaining successful AML/AFC programs under reduced budgets is significant, but it is not insurmountable. By embracing data-driven approaches, leveraging greater automation, optimizing resource allocation, investing in scalable decision intelligence focused technology, and fostering a culture of continuous improvement, financial institutions can navigate tighter budgets without compromising their commitment to compliance or impeding business growth.
A look ahead
Emergent digital tools present a double-edged sword: With the advancement of these technologies, money laundering and other financial crimes will also become ever more sophisticated, bolder in their objectives, and savvier in their utilization of modern methods to better evade detection.
The key to defeating these pernicious entities and organizations lies in innovation—using the latest technology to work smarter, not harder; improving speed and efficiency of detection, mitigation, and escalation in this dynamic landscape.
In order to maintain robust and effective AML/AFC programs that truly protect against financial crime while managing costs effectively, all in an increasingly demanding environment, enterprises have a couple of avenues to pursue: building the needed flexible, adaptive models in-house, or collaborating with best-in-class technology companies such as Quantexa to integrate their resources with and optimize existing AML/AFC protocols.
To learn more about how your company can benefit from Quantexa’s AML/AFC solutions, please get in touch.
