Are you also struggling to strike a perfect balance between being vigilant of the risks while also being efficient? This blog is a perfect guide for you!
Mainly financial institutions are faced with this consistent challenge of being vigilant while not being overly strict in their onboarding processes. The challenge in effectively observing and managing risks comes with a negative impact of impacting overall efficiency or customer relationships while ensuring regulatory compliance.
As per research report, “In an effort to protect global financial stability and prevent criminals from violating global regulatory protocols, around $20 billion is annually spent by European banks to establish AML compliance. On the other hand, U.S. banks surpass this amount and spend more than $23 billion to fight against financial crimes and fraudsters.”
This blog will discuss everything about healthy AML false positive reduction while keeping close focus on the urgency to address them and strategies to remove them without hampering the overall operational efficiency of the business model.
What Do We Call As “AML False Positive?”
Originally emerging from the field of diagnostics, the term false positive is used to represent the presence of a condition in a report that is not originally there.
“What is AML False Positive in AML Compliance?”
As quoted it “an operational error that generates a false alarm by identifying increased AML risk when actually it is not.”
What nuisance does it cause? In an already existing landscape, where there is an abundant volume of alerts ringing an alarm every second, emergence of false alerts alone causes additional exhaustion, both in terms of resource allocation and manual verification of the credibility of the alarms generated.
How to manage them reminds me of a consistent and ongoing challenge for financial institutions. Read ahead to know how your business can do it without investing more into resources or changing the entire workflow?
3 Reasons Why False Positives Must Be Avoided
Large amounts of false positives in any business regardless of the industry results in loss in terms of both time and resources. If left untreated, false alerts and resulting actions can result in regulatory aggressiveness resulting in fines twice more hefty than what it takes to manage false positives.
- Inefficient Resource Allocation
With elevated numbers of false alerts in any business managing to ensure AML checks, they might need resources to manually verify the false alarms and check for any credibility. The time it takes to verify aggressive volume of false alerts could have been better utilized addressing more relevant and credible alerts that might interfere with the business reputation.
- Poor Customer Relationships
Addressing the dilemma of false positives might be draining for the resources and might hamper the operational efficiency of the business, which is something related to internal damages these false alerts pose to the business.
However, the damages extend far beyond up to consumer relationships as well. Needless scrutiny of a regular client might cause you a potential client as you choose to be suspicious of them when they are purely legitimate. This not only results in loss of time and resources but simultaneously costs you a client.
Moreover, delays in business processing, especially slowed customer onboarding ends up with customer frustration and poor business reputation anyway.
- High Observance By Regulatory Authorities
When a business remains highly occupied covering the dead ends and risks posed by AML false positives, the real and high risk threats go unnoticed. The greater the gaps in complying with due AML regulations set for jurisdiction, the greater would be regulatory scrutiny over such businesses.
Considering the number of high risk exposure false positives directed toward the business, the existing dilemma is to figure out a way to fight these challenges.
Here are top 5 ways to manage AML false positives with Anti-money laundering screening
3 Ways to Remove False Positive with AML Watcher
Like every other business out there, are you also looking for false positive reduction screening software? AML Watcher with its industry leading features is going to be your win!
- Real time updated data
How often does your business check for data updates? How quickly does it get updated in your database? Both these questions might sound old to you, but have the most weightage when it comes to managing false positives.
- Biometric AML
While a name can match with thousand other individuals, biometric image matching as facilitated by AML Watcher reduces up to 90% chances of false matching thus providing precisely accurate matches.
- Custom Risk Based Screening
Custom approach to assigning a risk score to every incoming case lifts off the pain of false alarms. Cases that surpass a fixed threshold are only flagged thus reducing the exhaustion on manual verification of each false alert being generated.
Conclusion:
In conclusion, we can say that AML screening including false positives should be among least of the worries in 2024. With cyber crime making its ways into the financial industry, where faking identities is quite easy for criminals, mastering the art of reducing false positives is the high need of the time.
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