Anti-money laundering software

Anti-money laundering software (AML software) is software used in the finance and legal industries to meet the legal requirements for financial institutions and other regulated entities to prevent or report money laundering activities. There are four basic types of software that address anti-money laundering: transaction monitoring systems, currency transaction reporting (CTR) systems, customer identity management systems and compliance management software.
History.
Anti-money laundering guidelines came into prominence globally after the September 11, 2001 attacks and the subsequent enactment of the Patriot Act in the United States and the establishment of the Financial Action Task Force on Money Laundering (FATF). By 2010 many jurisdictions globally required financial institutions to monitor, investigate and report transactions of a suspicious nature to the financial intelligence unit in their respective country.
An entire industry developed around providing software to analyze transactions in an attempt to identify transactions or patterns of transactions, called structuring, which requires a SAR filing, or other suspicious patterns that qualify for SAR reporting. Financial institutions faced penalties for failing to properly file CTR and SAR reports, including heavy fines and regulatory restrictions, even to the point of charter revocation.
Some jurisdictions, such as Singapore, require financial institutions to conduct an independent assessment of technology solutions used in anti-money laundering procedures, if such financial institutions allow for non-face-to-face onboarding of customers.
Types.
There are four basic types of software addressing AML business requirements:
Transaction monitoring software.
These software applications effectively monitor bank customer transactions on a daily basis and, using customer historical information and account profile, provide a "whole picture" to the bank management. Transaction monitoring can include cash deposits and withdrawals, wire transfers and ACH activity. In the bank circles, these applications are known as "AML software".
Each vendor's software works somewhat differently. Some of the modules which should be present in an AML software are:
Customer Identity Management Systems.
The definition for Customer Identity Management Systems varies in different regions and jurisdictions. Most vendors include the following features in their solutions:
Machine learning for money laundering detection.
There are solutions based on artificial intelligence, which are characterized by much better efficiency in detecting money laundering, comparing to rule-based approach. Especially, deep neural networks are able to discover complex interdependencies between various activities performed to launder money. This translates into fewer false alarms and more accurate detection. In the near future, transaction monitoring systems will be based on machine learning rather than on rules and scenarios.