how AML false positives overwhelm compliance teams

Financial institutions (FIs) are required to monitor their transactions for suspicious activity as part of their anti-money laundering (AML) compliance program. Many FIs’ AML compliance programs rely solely on rules-based monitoring instead of rules and machine learning. While employing only rules-based monitoring is adequate for some firms, numerous AML false positives generated with a poorly tuned system can lead to consistent headaches for many organizations. This leaves banks’ AML compliance teams feeling burned out, which compromises their AML programs’ effectiveness. Here’s how banks can help AML teams avoid feeling burnout from false positive overload.

What are AML False Positives in the Context of Transaction Monitoring?

Anti-money laundering false positives occur when a legitimate customer’s transaction is flagged as potentially suspicious, only for nothing to be found suspicious upon further review. This happens when the transaction triggers one or more of the FI’s rules, causing the transaction to be labeled as a potential money laundering activity.

Around 95% of system-generated alerts are considered false positives by some estimates. This high rate of false positives is music to the ears of financial criminals and money launderers. The longer analysts chase false positives, the longer criminal activities can continue uninterrupted. 

How False Positives Contribute to AML Analyst Fatigue

The overwhelming volume of false positives weighs down review teams. High volumes of false positives contribute to AML analyst fatigue in three key ways. 

  • The Human Factor. Chasing false positives can feel like spinning relentlessly on a hamster wheel. Many analysts want to channel their inner crime-fighting detective by pursuing meaningful investigations and stopping financial criminals. If they find their job is simply a checklist task, they eventually feel bored and disparaged by the work. If there are no clear career advancement opportunities, many analysts will consider working at another company or leaving the role altogether.
  • The Tech Factor. The state of an organization’s technology can also contribute to burnout. If an FI’s system relies on hundreds of rules operating ineffectively, the results can be devastating. This arrangement creates a tall maintenance order that analysts, specialists, and managers must address. Giving analyst teams a system that requires constant maintenance and oversight is a frustrating experience that negatively impacts morale.
  • The Repetition Factor. Analysts often also feel bogged down by the amount of repetitive, manual tasks that are part of their responsibilities. These tasks include accessing relevant customer data for investigations. They frequently stressed over having to perform these mundane tasks over and over again. 

Costs of AML False Positives

These factors can have serious repercussions for banks if they are left unchecked. Banks not working to address false positive burnout among their AML compliance teams take significant risks in three key areas:

  • Operational Costs. False positives ultimately add friction to legitimate customers’ transitions and waste analysts’ time. These FIs risk improving operational margins if their false positive rate keeps rising. As the FI’s volume grows, so too will its false positive rates and operational costs (as well as opportunity costs). 
  • Internal Audits. Large alert volumes take longer to investigate. If the alerts are not investigated in a timely manner, FIs risk violating their own service level agreements (SLA) and disrupting internal processes. This could have regulatory consequences as regulators audit workflows to understand why the organization failed to follow its own SLA.
  • Criminals Go Undetected. Arguably, the most serious consequence of false positive overload and analyst burnout is that illicit activity goes undetected. Criminals continue to funnel revenue from illegal activities (e.g., illegal drugs, firearms, human trafficking, terrorism, and more) through the FI while analysts waste time pursuing false positives.

3 Steps for Banks to Reduce AML False Positives

Reducing false positive rates will mitigate AML team burnout. Here are three steps banks can take to keep team members engaged and improve operational efficiencies.

Implement Strong AML Training Programs

Analysts want to succeed at their jobs. But these team members will feel discouraged if they spend most of their time addressing false positives. Banks should get ahead of this by training their AML analysts on how to spot suspicious activity (and the opposite) more efficiently so they can do their jobs more effectively. Implementing training programs also keeps staff engaged in the latest AML trends and motivates them to try new tactics to stop crime.

Rotate AML Compliance Professionals

Giving team members exposure to different functions and activities will keep teams engaged. Rotational programs are a great way to offer team members career advancement and skills development. This will also add much-needed perspective on their original role and assist in their understanding of the impact they have on other areas of the organization.  

Upgrade Your FI’s AML Technology

FIs need technology systems that don’t require frequent maintenance. And they need systems they can trust. Staff who aren’t worried about their transaction monitoring system breaking or spending most of their time maintaining rules are focused on investigations. Ask your FI’s service department what kind of issues your team is having and how leadership can help. Research what other companies are using and how they like their systems. Finally, consider implementing machine learning solutions that can automatically perform some of the repetitive, manual tasks that bog down AML teams. That solution should also be smart enough to help you decide when to alert (and when not).

AML compliance teams are committed to doing their jobs and stopping financial criminals. They should feel supported in their roles. FIs need to help team members avoid burnout from false positive fatigue and keep their teams focused on productivity. Providing proper career development, opening rotation opportunities, and investing in the right technology is critical to making a real impact on false positive burnout.

Download the The Ultimate AML Compliance Checklist for FIs to learn the key components for an effective AML compliance program and make sure your organization checks all the boxes.