Relationship-Based Monitoring

Douglas Stevenson

It is no secret that our global financial institutions are being used to launder money. The scale of how much money is being laundered is sobering: In 2009 The United Nations Office on Drugs and Crime (UNODC) conducted a study to determine the magnitude of illicit funds generated by drug trafficking and organized crimes and to investigate to what extent these funds are laundered. The report estimated that criminal proceeds amounted to 3.6 percent of global GDP, with 2.7 percent (or $1.6 trillion) being laundered. (Forbes Insight “Don’t Blame the Transaction Monitoring Systems”, 2017, p. 3) That was 8 years ago. The numbers are likely more depressing today in 2017.

The intent of this paper is to explore how Relationship-Based Monitoring can improve the effectiveness of our financial institutions’ efforts in identifying and reporting on behavior that exposes a broader set of relationships involved in money laundering. In preparing this paper there were a total of 9 financial institutions interviewed: 5 global systemically important banks (GSIB), 2 broker dealers, 1 super-regional bank and 1 regional bank. The author of this paper is a is a Certified Anti-Money Laundering Specialist (CAMS) with more than 15 years of experience in the industry serving the banking, capital markets and asset management companies in the areas of AML, enterprise compliance, quantitative strategies and fraud management. In his current role he leads a team of professionals to address the challenges in financial crimes and compliance providing both business and technology guidance.

Download PDF