Criminals are continuously looking for ways to use rapidly advancing technology for their own nefarious purposes. This is an ongoing issue for many community banks as they try to prevent money laundering and other crimes from happening within their operations. To protect your bank from criminal infiltration and ensure your bank remains in compliance with Bank Secrecy Act/Anti-Money Laundering (BSA/AML) laws and regulations, it’s best to fight fire with fire. Consider using data visualization software to help detect possible crimes before they can take hold.
How to comply with BSA/AML
Banks that fail to take reasonable steps to detect and prevent money-laundering activity risk government fines. They also may receive severe negative publicity that harms their reputations.
Several developments over the past few years reflect the federal banking agencies’ increasing concern about BSA/AML compliance efforts. For one thing, the Financial Crimes Enforcement Network (FinCEN) introduced customer due diligence (CDD) rules that require institutions to incorporate beneficial ownership identification requirements into existing CDD policies and procedures.
Within the past few years, the Office of the Comptroller of the Currency (OCC) alerted banks to increasing BSA/AML risks associated with technological developments and new product offerings in the banking industry. In addition, regulators increasingly have been scrutinizing automated monitoring systems used by banks to detect suspicious activity to ensure that they’re configured properly.
Regulators haven’t limited their heightened scrutiny to larger banks. In fact, some large banks have restricted certain customers’ activities or closed their accounts because of BSA/AML concerns. As a result, higher-risk customers often have moved to smaller banks with less experience managing the associated BSA/AML risks.
How to use visual analytics
Data visualization software — also known as visual analytics — can be a powerful AML tool. Traditional AML software products and methods do a good job of detecting known AML issues. But data visualization software, which is commonly used as an antifraud weapon, excels at spotting new or unknown AML activity.
As criminal activity becomes more sophisticated and more difficult to detect, traditional AML software or methods may no longer be enough. Data visualization software creates visual representations of data. These representations may take many different forms, from pie charts and bar graphs to scatter plots, decision trees and geospatial maps. Visualization helps banks identify suspicious patterns, relationships, trends or anomalies that are difficult to spot using traditional tools alone. It’s particularly useful in identifying new or emerging risks before they do lasting damage.
Criminal enterprises that wish to launder money typically use multiple entities and multiple bank accounts, both domestic and foreign. Using data visualization software, banks can map out the flow of funds across various accounts, identifying relationships between accounts and the entities associated with them. Data visualization can reveal clusters of interrelated entities that would be difficult and time-consuming to spot using traditional methods.
These clusters or other relationships don’t necessarily indicate criminal activity. But they help focus a bank’s AML efforts by pinpointing suspicious activities that warrant further investigation.
Use all the tools at your disposal
Money-laundering is an insidious and ever-present risk, and fraudsters are increasingly technology-savvy. Your bank needs to be alert to the potential dangers and use every analytic tool available to head them off, including data visualization software mapping.
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