RPA for AML and KYC – Automate Financial Crime Investigations

In my Financial Crimes Predictions 2021: More AI & Ransomware post, I talked about how banks will move to operationalize their Anti-Money Laundering (AML) compliance programs to achieve greater efficiencies and how robotic process automation (RPA) adoption will drive the paradigm shift. RPA is essential for this transformation to achieving efficiency by automating repetitive, high-volume processes with many manual tasks and data collection and thus allow their human resources to focus on other high-value tasks. RPA provides cost efficiencies, increases employee productivity, and provides standardization for repetitive processes.

A United States Government Accountability Office (GAO) study found that financial institutions spend between 0.4% and 2.4% of total operating expenses on anti-money laundering activity, while some of the largest banks in the study spent between 0.5% and 0.7%.  According to Accenture Consulting, the costs of managing an AML program have increased by as much as 20.6% in 2020 and AML program violations ended 2020 with record fines. 2021 has been extremely active in dispensing AML violations.

• U.S. Federal Regulators imposed over $200 million in penalties on corporations in just January and February 2021 alone, and many top lawyers feel 2021 will be a record year for AML penalties.
• Asia Pacific financial institutions accumulated over $5.1 billion in penalties in 2020 for not complying with AML regulatory requirements and surpassed the United States in enforcement actions.

Most AML program cost increases are partly driven by labor costs due to manual processing of alerts and making the appropriate alert decision.

With all the expense pressures that AML compliance programs face, corporations are seeking ways to reduce the regulatory burden, and one area that is top of mind is RPA. RPA for AML program management has been written about extensively and some financial institutions have implemented robotic automation. However, there are still many companies that need to take the leap into the robotics sphere, while many companies struggle on where to begin.

For AML, some typical use cases are:

• Know Your Customer (KYC) verification
• Auto-closing of alerts based on certain, defined criteria
• Pre-defined investigation workflow
  • Get the right alerts to the right skill set
  • Route alerts to differently skilled teams (or geographic location) based on alerts’ priority
• Automated data gathering for investigations
  • Due diligence, transaction monitoring and/or sanctions
  • Collect data from internal and external sources. compiled in a file for the appropriate investigator or analyst.
• Automated Suspicious Activity Report (SAR) e-filing
• Preset KYC periodic reviews
  • Triggers automated tasks for KYC rescoring
  • Data collection

Robots Focus on Low-Value Tasks, Allowing Humans to Investigate

The best way to view RPA initially is as the ultimate “helper,” carrying out the basic work in a process and enabling humans to focus more on high-value activities.

When financial institutions look at potential processes for automation, they look for processes with highly repetitive and manual tasks. Keep in mind that a process may not be able to be 100% automated at first but could be fully automated over time. Establish an initial percentage target of what will be automated — automating 60% and leaving the remaining 40% to humans could be a good initial target. It’s always possible to come back and optimize the process later.

FICO Automates KYC Watchlist Screening

FICO was successful in helping a multinational retail bank reduce the number of manual processes that existed in their Know Your Customer (KYC) watchlist screening process.

The retail bank faced many challenges with its KYC process, and turned to FICO for help with automating the screening logic used for watchlist regulatory requirements. Automating the process freed the investigators from time-consuming, manual tasks and allowed the employees to use their skills and talents for more meaningful work that led to an increase in employee satisfaction.

FICO’s embedded RPA technology empowers AML compliance managers to easily configure their alert and case management system to capture, interpret, and manipulate data for triggering responses and automating processes. Applying RPA can lead to a reduction of manual effort by more than 80%, while ensuring consistency and proper documentation of the automated decision.

For more information on how FICO can assist your organization with implementing RPA for your AML and KYC compliance programs, see www.fico.com/financialcrime.