Laundering and Bank Fraud
Economic crimes, fraud and money laundering pose major challenges for every financial institution. While needing to detect malicious and abusive activity across channels as early as possible, financial institutions also need to ensure they don’t unnecessarily infringe upon the banking activities of good customers while concurrently maintaining regulatory compliance. The key objective: identify only those actions that truly represent possible fraud and money laundering.
As Canada increased the compliance requirements for banks to identify and prevent money laundering activities, one of Canada’s leading banks realized it already possessed part of the answer to this challenge — Proactive Risk Manager. The bank had relied on the offering for many years to not only detect potential money laundering transactions but also to protect customers against fraudulent banking activity.
Proactive Risk Manager effectively met the bank’s needs, but once Canada enacted the stronger AML regulations, the bank needed to enhance its profiling capabilities. In addition to making sure the bank complied with the new requirements, management also wanted to reduce the number of false-positive fraud alerts, which can negatively impact good customers. Reducing such alerts
would also allow analysts to focus more time on investigating activities that potentially represent actual fraud.
Based on the past success of Proactive Risk Manager — along with the expertise in AML and fraud detection ACI has demonstrated over the long-term partnership between the two companies — bank management once again turned to ACI.
The bank also wanted to utilize the expertise at ACI because there are many ways to write alert rules, but the bank found itself in a reactive mode — chasing many transactions that represented “good” client activity. The bank instead needed help to focus more time on “bad” client activity.
ACI’s consulting services helped adjust how Proactive Risk Manager manages AML and fraud detection through a three-phased approach:
- Profiling customers
- Automating the customer risk rating process
- Monitoring customers on an ongoing basis by creating and integrating rules and meta-rules based on the monetary and non-monetary activity of high-risk customers
The bank then engaged the ACI fraud team to help move forward with the approach. ACI proved particularly helpful in configuring customer profile tables the bank relies on to detect activities that suggest fraud or money laundering is taking place. ACI also showed the management team how the bank could bolster its monitoring capabilities through enhanced due diligence on high-risk customers.
The expertise ACI provided proved particularly helpful given that the bank could not add any additional analyst resources to address the new AML regulations. Since the bank’s available resources for monitoring AML were limited, it needed to become more efficient with the way it monitored bank account fraud. This meant reducing false alerts to maximize time spent on catching fraud.
Another key aspect that allowed the bank to expand its fraud capabilities was extending the use of the solution across all product lines. In addition to checking for debit card and check fraud, the bank leveraged the solution to monitor additional channels — such as online wire transactions, investment products and registered loans — to increase cross-channel fraud and AML visibility. As a result of the engagement, the bank was better versed in maximizing Proactive Risk Manager. Management has been able to take those learnings from ACI and bring them to the next level of AML and fraud prevention.
Since enhancing Proactive Risk Manager with the additional profiling tables and alert rules, the bank has achieved impressive results:
reduction in debit card fraud alerts
reduction in AML alerts
fraud detection rate
reduction in required analyst resources
Before modifying Proactive Risk Manager, the bank used to look at too many alerts because of so many false positives. By applying the new rules and profiling tables, management created proper alert thresholds to reduce the number of alerts. The bank managed to significantly reduce alert volumes even though the bank had grown in recent years and had increased the banking channels it monitors.
The transition to enhanced profiling allowed the bank to reassign analyst resources to more in-depth fraud investigations. The bank also improved the customer experience since legitimate but higher-risk debit card transactions were now declined less often. Bank analysts also understood client patterns better while finding out sooner when clients deviated from their normal patterns.
In addition to reducing the number of fraud losses, the bank is also now receiving a satisfactory rating from external and internal auditors on the measures it has deployed to thwart fraud and money laundering. Using ACI management services was an efficient and cost-effective way to provide business analysts with the teachings required to develop profile tables correctly. ACI also proved itself as a fair business partner — billing only for the actual time used, which was much
lower than the original quote thanks to ACI’s efficiency.