The first blog of this three-part series highlighted how converging Fraud and Anti-Money Laundering (FRAML) efforts can unlock powerful, collective outcomes for banks and financial services firms. This blog explores how a unified technology platform can strengthen this FRAML approach.
Estimates suggest that 2-5 percent of global GDP is laundered annually, while global losses due to fraud totaled USD 485 Billion in 2023. These crimes often follow similar patterns of exploitation, impacting financial institutions, their customers and society at large.
The silver lining is that technological advancements and cutting-edge data analytics have significantly enhanced detection capabilities. However, banks and financial institutions now require a more integrated approach to combat fraud and money laundering while controlling costs. Given the overlap in detection methods, implementing a unified approach, FRAML, offers a potent solution.
Integrated Platform, Multiple Advantages
A FRAML platform integrates data elements, transactions and field attributes into a single feed, enhancing the ability to detect both types of criminal activities. Regulators are increasingly supportive of this collaborative approach, which brings several key benefits:
1. Comprehensive Data Analysis
One of the most important advantages of a unified platform is how it enables seamless data sharing and analysis of transaction data and customer behavior. This creates a more comprehensive view, something that’s often challenging when functions (AML and fraud) operate in silos.
2. Holistic Risk Evaluation
Institutions can better evaluate a customer’s overall risk by collectively assessing fraud and money laundering risks. Identifying links between fraud and money laundering that might be missed when viewed in isolation uncovers hidden vulnerabilities. This proactive approach can help identify red flags during onboarding and ongoing monitoring and protect customers and the financial institution from regulatory penalties.
3. Streamlined Operations
A unified platform streamlines processes by eliminating duplicate work, allowing for more thorough investigations and faster system enhancements. Any changes or new features can be rolled out more efficiently and cost-effectively.
4. Advanced Technology Integration
Integrating advanced technologies like Artificial Intelligence (AI), Generative AI and Machine Learning (ML) is faster and more effective on a unified platform, enhancing fraud and AML functions. This leads to quicker, more accurate detection of underlying risks and more efficient decision-making.
5. Reduced False Positives
Traditional fraud and AML systems generate high volumes of false positives, leading to inefficiencies. With a unified platform, institutions can minimize duplication of alert generation and refine rules to produce more accurate alerts.
6. Enhanced Reporting
A unified system enables financial institutions to deliver comprehensive reports, strengthening regulatory compliance. These reports offer in-depth, data-led insights that benefit the institution and regulators, with faster response times to new requirements.
Best Practices for Crafting a Robust Solution
While a unified FRAML approach offers significant cost savings and efficiency improvements, integrating fraud detection and AML functions brings various challenges – from data integration and change management to regulatory compliance.
To address these challenges and build a robust technology platform capable of effectively managing risks in a complex environment, financial institutions must develop a best practice-driven strategy. This involves:
- Assessing their current technology landscape and data complexity
- Establishing a plan to build the necessary common data framework for FRAML
- Collaborating with the right technology and domain partner to tap into their proven expertise, accelerating adoption and outcomes
Read the third and final blog of this series, which explores how establishing a Center of Excellence – a financial crime investigation hub – can bring together the necessary people, processes and technology to elevate outcomes across the board.