ork.AI
The volume of suspicious Activity Reports (SARs) filings has started to overwhelm many financial crime compliance organizations. In fact, FinCEN stated in its Year in Review FY 2023 report that 2023 saw a massive 4.6 million SARs filed – a 28% increase over 2022.
The driver behind SARs filing volume increases
Banks and other financial institutions (FIs) have cast a wider net for what they consider “suspicious” activity and have taken a conservative approach to clearing the bar – a stance that prevents them from running afoul of regulators. This conservative approach puts transaction monitoring (TM) under the microscope more than ever. It also swells the compliance obligation as organizations must manually review millions of TM alerts each month, even though most alerts represent non-suspicious items or false positives. False positives or not, they all must be reviewed, making the program to address them the largest compliance cost center. Reviews require a lot of time and large teams of people to perform them. Yet, the process of determining proper alert dispositions is rife with errors due to high levels of redundant, manual work.
Technology relief and FinCEN support for it
The good news for compliance organizations is that AI is bringing effective innovation for AML/CFT programs. Specific to SARs, AI provides the following improvements:
- Better controls
- Increased consistency of approach to procedures
- Higher-quality alert reviews
- Reduction in material/immaterial errors
This type of technological innovation forms the basis for FinCEN issuing a proposed rule on June 28, 2024, that seeks to strengthen and modernize financial institutions’ AML/CFT Programs. According to FinCEN, “the proposed rule would encourage financial institutions to modernize their AML/CFT programs where appropriate to responsibly innovate, while still managing illicit finance risks.”
Transforming TM analysts into more strategic contributors
While many TM analysts were attracted to their job’s analytical work, many have found their days to be tedious – filled with performing data gathering tasks rather than leveraging their true talent for fighting financial crime, managing risk and mitigating it. In traditional compliance operations, upwards of 80-85% of analyst work is spent tracking down information and supporting evidence for case reviews. In doing so, analysts have to gather information from multiple systems and even perform outreach to relationship managers who can provide both additional information and nuance, and TM analysts must do this before they can even begin to analyze an alert. Essentially, they are mired in a lot of time-consuming work as part of an alert review, even for a simple alert.
By automating this tedious, error-prone work and auto-populating the SAR narrative, AI drastically reduces mistakes, ensures complete information, and frees up the analysts to work on higher-value/higher-risk type of work – making them more strategic contributors to the program.
Beyond individual analysts, AI can make an entire compliance program more effective by presenting a high-level view which no single analyst could ever provide. AI can look across the work of all analysts to quickly identify patterns and links much more easily – key to uncovering the connected nature of individual alerts and potentially nefarious actors.
No more fire drills to file SARs
Organizations typically review and disposition their alerts and SARs on a 30/30/30 schedule – 30 days to review, 30 days to work on escalated alerts and 30 days to file a SAR (after the decision to file). Many banks that adhere to this 90-day cycle, especially those with large alert volumes, lack the people resources to perform all the work, resulting in alert review backlogs and the need to rush SARs filings to beat deadlines.
AI can alleviate backlogs by taking over the manual process of reviewing the alert, pulling together the needed information to comply with the procedures around that alert and the case, and then pulling all that information together for a narrative for the SAR, as well as filling out the SAR form to be submitted to FinCEN. Since AI can work 24x7x365, alerts get accessed and worked in real time, reviewed immediately and dispositioned or escalated immediately, eliminating the SAR filing timeline scramble.
Get started with AI now
Many financial institutions have already deployed AI into their financial AML and sanctions programs, and others are evaluating how to leverage AI to build more effective and efficient programs. Rather than asking when to deploy AI, FIs want to know more about how to make specific improvements with AI, especially in their transaction monitoring and SAR processes. Banks that have already taken the step forward recognize the time and resource benefits which AI delivers, and eventually, the use of AI in TM and SAR programs will be a must, not a differentiator.
Click here to learn more about how WorkFusion’s AI Digital Worker, Isaac, an AI Transaction Monitoring Investigator, can help streamline your TM and SARs program.