AML Transaction Monitoring: back to basics

How to make your TM rule based system impeccably efficient? Effectiveness of TM controls: what FINMA expects

Introduction by the Chairman of the Conference

• Recent legislative and regulatory changes – What are the key aspects of the Revision of the Money Laundering Act (MLA), Money Laundering Ordinance (MLO-FINMA) and New FINMA guidelines
• Main trends and challenges – From virtual assets to corruption cases
• Ongoing challenges in transaction monitoring – from false positive management, data quality, growing regulatory complexity to regulatory arbitrage between jurisdictions and technological advances in transaction monitoring – where do systems stand? Is Transactions Surveillance effective? What are the lessons learned from regulatory supervisory reviews and enforcement cases in relation to AML?

Does the transactional behaviour of your clients make sense?

Evaluating the transactional behaviour: when is the transactional behaviour not compatible/coherent with the wealth, activity, the personal situation, the structure of the client?

• What is the usual transactional behaviour of different client profiles: PEP, operating company, domiciliary company, trust…
• What is the relation between the financial situation, personal situation, activity of the client, structure, and the expected transactional behaviour? When is the behaviour in line with these characteristics of the client? What are the unusual / abnormal behaviours?

How to create an AML TM system that is efficient for your clients

Client Risk Rating

• Goal of CRR, typical risk factors to be considered and examples of rule-based approaches.
• Data sources, triggers and interaction with Compliance processes.
• Testing and assessment: key methodologies.

Client Segmentation

• The benefits of Client Segmentation and differences between a segmentation for business and financial crime purposes.
• Top-down segmentation driven by business input.
• Data-driven bottom-up client segmentation.
• Analytics to test the client segmentation.

Rules: Selection, Parametrisation & Tuning

• Rule based monitoring: from simple to complex rules.
• Parameter selection and tuning for efficient AML TM systems and why the input from client risk rating and segmentation is important.
• Above and below the line testing: validation based on statistical samples.
• Machine Learning models as an enhancement or complementary solution to rule-based systems.

Design and effectiveness of controls

New AMLA audit guidelines for banks: how to control the design and the effectiveness of the Transaction Montoring

• Not only the design of controls will be audited but also the effectiveness of your controls
• Design and implementation of AML Transaction Monitoring systems: sometimes some important differences exist (observed deficiencies, good practices)