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Tackling the AML challenge

Managed service: A cleaner approach to AML efforts

Today, every large financial institution must process millions of transactions each month. And each month, approximately 10 percent of those transactions are flagged for potential suspicious activity.  That’s a growing company expense, as time and money must be spent on investigations that add nothing to the bottom line. But the challenges to Anti-Money Laundering (AML) efficiency go deeper.

Financial institutions are finding it difficult to recruit and retain qualified AML transaction monitoring personnel, given today’s wealth of attractive employment options. The ideal for AML departments – always sought but rarely achieved – is an experienced, dependable transaction monitoring staff, nimble enough to handle risks and policies as they change; and sized appropriately for evolving needs. But companies know it's hard to find the right people and it can be quite expensive to keep them, especially when pay may increase by nearly tens of thousands simply by switching to a new organization1.

Given these circumstances, many organizations are turning to managed services to address their transaction monitoring (TM) needs.

A managed service approach is a valuable partnership that can benefit all. It creates an efficient, high-quality transaction monitoring process at an attractive cost. It establishes a detailed, repeatable process that both clients and regulators can trust. And it can transform a compliance function into a unit that adds strategic value to an organization’s larger risk management effort.

Managed service: A cleaner approach to AML efforts

There are many advantages to managed service compared to in-house teams. Perhaps the two most compelling are lower costs and a potentially superior product. An automated, turnkey solution is particularly desirable now, when many institutions still rely on task-oriented teams using inefficient manual processes, and when swamped compliance departments struggle to avoid backlogs that invite regulatory scrutiny.

In a managed service approach, the provider takes responsibility for the operational aspects of transaction monitoring; while the financial institution maintains oversight of the process and has ultimate responsibility for decision making and Suspicious Activity Report (SAR) filing.  In this way, institutions remain in compliance with AML regulations that require them to retain primary responsibility for identifying and reporting SARs. 

Years ago, before transaction monitoring was a distinct discipline, it was difficult to find qualified providers. Banks and other institutions were naturally reluctant to relinquish any part of the process to an outside firm then. But today there are notable, highly credentialed consultancies, accountancies and law firms that offer transaction monitoring services. The challenge isn’t finding one; it’s selecting among them.

What to look for in a transaction monitoring (TM) service provider

Organizations must be confident that a managed service arrangement will deliver a result that is at least as good as the in-house product for a significantly lower cost; and that the arrangement will allow them to maintain oversight and control and not trigger regulatory scrutiny of their organization.

A qualified service provider, to be worthy of the name, must offer a trained and accredited team of professionals steeped in AML practices and up to date on all policies and regulations. The team will understand and adhere to the client’s policies and procedures and will support the client through a transition at a pace that fits with its risk appetite.

The best service providers can deploy trained people at a significantly reduced cost compared to hiring them. An exceptional provider will include its financial crimes consulting unit in the process, adding an extra layer of oversight and control at no additional cost. And by finding and fixing process inefficiencies and system limitations, they deliver immediate savings that accrue each year. They can also bring technology capabilities such as Robotic Process Automation and machine learning for pattern recognition that can reduce false positives and save time.

Besides evaluating its own performance regularly; a provider should expect and welcome the client to conduct quality assurance (QA) as well. In this way, the client can be certain the work is performed as agreed. This QA has the added benefit of assuring regulators that the institution maintains oversight of the process, a key regulatory concern.

Federal watchdogs have always kept a very close eye on managed service arrangements, viewing the transfer of information between entities as an area ripe for potential errors and penalties. It’s important, therefore, to work with a known and respected service provider. The better a service provider’s reputation, the longer its history and the more it is trusted by federal authorities, the fewer AML problems a client is likely to have.  

Making the choice

When evaluating potential providers, past performance counts. Clients should examine in detail a provider’s history in the transaction processing space, reviewing previous projects for their scope, cost, timing, and outcomes. In addition to those easily quantifiable areas, the human side of the equation matters as well.

Clients will want to know how the provider will work with the client’s current team. How will the service arrangement be implemented? Is there a process in place? Is the provider willing to structure the engagement so that the client’s team members can stay? These are serious questions, and a quality provider should be ready to answer them.

Just as important, a provider should ensure a transparent process, using data and analytics to produce clear, accurate reporting. In this way, the client is always part of the oversight process, even when a service provider is handling much of the operational activity. 


Most financial institutions are focused primarily on things other than AML. But a service provider is not. A quality service provider has invested in both the people and technology that enable delivery of superior transaction monitoring at significant savings.

You can’t meet today’s challenges with yesterday’s solutions. The managed services approach gives you an advanced, cost-effective AML monitoring process that you, regulators, and clients can trust. And in a world filled with risks, it gives you and your organization one less thing to worry about. 


  1. “Majority of U.S. Workers Changing Jobs Are Seeing Real Wage Gains,” by Rakesh Kochhar, Kim Parker and Ruth Igielnik – Pew Research Center, July 28, 2022.

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