Perfecting the AML Efficiency/Effectiveness Equation by Automating Due Diligence


By Camilla Yellets, director, financial crime compliance, LexisNexis Risk Solutions

Effective due diligence is the foundation of the consumer/customer, supplier and third-party relationships that drive strong revenue generation. How can businesses balance effective anti-money laundering (AML), know your customer (KYC) workflows, customer due diligence (CDD) and third-party risk rating workflows with the levels of efficiency that today’s competitive market and contentious geopolitical climate demand?

The answer can be found through automation and how automating key due diligence activities helps center a financial crime compliance program at the intersection of efficiency and effectiveness.

Converging Due Diligence Challenges are Complicating Compliance

Businesses are dealing with a convergence of due diligence challenges stemming from digital acceleration, geopolitical volatility and renewed regulatory focus. Resource-strained compliance teams also face increased budget scrutiny as the global economic outlook begins reflecting inflation pressures and impacts from Russia’s invasion of Ukraine.

Enforcements from the Financial Crimes Enforcement Network (FinCEN) were edging back up in 2022 and some recent fines are retroactive. FinCEN is showing little tolerance for anti-money laundering programs that do not pair business growth with compliance capabilities.

Zero tolerance equally characterizes today’s digital consumers whose expectations for instant transactions are at an all-time high. Due diligence delays and productivity lags at onboarding can quickly add up to consumer abandonment and lost revenue.

The unprecedented volume, velocity and scope of plurilateral sanctions and regulatory actions stemming from Russia’s invasion of Ukraine add another layer of complexity and resource demands to due diligence workflows. It is an understatement to say doing much more with less is turning into a daily compliance struggle for many organizations.

Automation Advantages Can Fuel the Marriage of Efficiency and Effectiveness

An efficient due diligence workflow is meaningless if it doesn’t underpin a highly effective, risk-based approach to compliance. However, effective due diligence shouldn’t erode the speed of day-to-day business operations or customer experience. There are many ways automation can help answer the efficient and effective conundrum.

Automation tools and technologies, such as application program interfaces, machine learning and artificial intelligence, can help accelerate risk assessment and decisions at key points in due diligence workflows. It is important to evaluate the operational advantages a business can achieve with automation within the framework of regulatory requirements and expectations. These include:

  • Automating the collection of the documentation needed during onboarding. This reduces workflow delays while also contributing to effectiveness by raising the level of process consistency and providing a way to record and prove the collected documents as needed.
  • Automating AML and KYC screening enables a business to prioritize accounts that need further investigation or enhanced due diligence and provides a higher level of traceability to help demonstrate the effectiveness of risk-based policies.

Automation helps businesses segment workflows more effectively. Organizations can redeploy human capital resources to focus on higher value compliance decisioning and activities by automating more rote and routine due diligence processes.

Aligning the Balance on the Risk/Control Continuum

Digital acceleration and today’s evolving regulatory climate are creating dynamic due diligence risks. Static due diligence approaches, siloed functions and disparate data limit an organization’s ability to outpace risk. Missed status changes in customer and supplier relationships can be detrimental in today’s real time economy.

Leveraging automation to support a continuous approach to risk-based due diligence helps better align enterprise resources to support the execution of internal policies around customer risk rating and ongoing monitoring. Automation facilitates the ability to capture a more holistic and end-to-end view of due diligence risk that enables an organization to responsively manage the inherent customer and supplier risks in a controlled framework. The technology fueling automation also underpins improved compliance effectiveness by providing a clear framework to document, demonstrate and defend compliance policies and risk controls.

Utilizing automation to integrate due diligence intelligence across core enterprise processes delivers time savings and cost efficiencies while contributing to a more responsive compliance program.

Perfecting the efficiency/effectiveness equation can result in a due diligence workflow that respects an organization’s risk appetite and reflects evolving market and regulatory realities.