AML Rule Tuning: Applying Statistical and Risk-Based Approach to Achieve Higher Alert Efficiency

Author: Umberto Lucchetti, CAMS-FCI

In order to maintain AML detection scenarios current with best market practices, rule tuning exercises have become an ever-increasing important task to perform at a financial institution. The methodologies to tune AML detection scenarios are also becoming more complex with heightened expectations from regulators. The tuning needs must be constant, that is, continuously applied over time to identify potential new risks or new typologies not covered by the current process in place. Likewise the application of a risk-based approach to the transaction monitoring process should also be taken into consideration by banks since it helps to focus the efforts and resources of staff on what poses a higher money laundering risk for the institution. This tuning will directly benefit the financial intelligence unit (FIU) and consequently the financial crime investigators who will have more productive alerts to review, having more time to investigate the potential suspicious alerts, therefore, improving the transaction monitoring process as a whole.

This white paper provides an overview of the importance of the AML rule tuning and the application of the risk-based approach to the transaction monitoring process, defining and giving examples on how to implement and perform these two important processes to the transaction monitoring scenarios of a bank.

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