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Five ways to help combat money laundering


James Cummans at TCF National Bank in Minneapolis has fresh challenges each day – keeping up with latest developments in money laundering and other fraudulent actions. It’s an ever-vigilant process. “Fraudsters target weakness in banks,” says Cummans, TCF’s Executive Vice President, Director of BSA, Compliance & Fraud.

All it takes is for one bank to falter and fraudsters gain a new portal to launder money. That one bank’s weakness could affect the whole industry, bringing greater regulatory scrutiny down upon all financial institutions. As Cummans notes, “all major regulatory change has come as a result of catastrophe.”

It takes a number of actions to fight against money laundering. We’ve compiled five tips from TCF Bank to take back to your own institution.

1. Improve Searches with Technology

It’s increasingly difficult to separate serious potential threats from the many false positives turning up in searches.

“There are a great number of alerts that have to be looked at in order to lay a net over all the accounts you have in an institution,” Cummans said. “If we can reduce false positives, we can expand the scope of accounts to a more granular level and make reporting more effective.”

Using some form of technology, such as AI, to conduct constant searches can reduce some of the burden for AML officials, essentially weeding out some false positives while expanding searches. With technology, “you can look at a broader scope of alerts without having anyone physically going through all of them,” said Cummans. “It makes for better coverage while letting staff devote their efforts to accounts deserving their time and attention.”

2. Have Regular Cross-Communication

TCF runs a quarterly round table with state and local law enforcement and area banks to discuss trends and new ways people are working to circumvent the system, says Cummans. Law enforcement provides intelligence about fresh scams to banks, though often “banks are typically seeing these [schemes] before law enforcement is. We’re providing a lot of details to them.”

By having regular meetings, banks and law enforcement can keep each other up to date, verify any suspicions, identify possible networks, and enhance the public-private partnership, creating a united front against money launderers.

3. Use Data Analytics to Find Patterns

“Data analytics are a very critical piece of combating money laundering,” Cummans said. “We’re typically finding multi-factored patterns occurring – [fraud] is happening in this geographic region with this specific product type, from customers with this specific potential occupation.”

Once AML officials recognize questionable patterns, they can develop client models, tiering potential risks and incorporating daily negative news alerts. “We would see if there are correlations between negative news and any characteristics of the account, whether it’s geography or other factors,” he says. The goal is “real-time analysis of a customer’s risk before they’re ever in the bank. Not two or three days after the fact. All they’ll need is a couple of days – the money will have been ingested into the bank and it’s gone.”

TCF uses due diligence tools like Thomson Reuters CLEAR to better link accounts with potential alerts or money laundering patterns. Finding individuals with multiple PINs or with connections to tax fraud are among the many factors that could trigger further investigations.

4. Standardize Your Systems

As many banks have grown via acquisitions of rivals, they’ve often pieced together a network of legacy computer systems. Some divisions may use spreadsheets, others may use ledgers. This disparity of systems can hinder antifraud efforts, preventing various branches from effectively communicating with each other.

It’s why more financial institutions are moving into a fully digital environment, expanding their use of cloud software and big data, “overlaying standardized definitions and inventories of definitions of terms so that they can be standardized across the entire organization,” Cummans says.

5. Structured Training Is Essential

AML officials need to know what to look for. TCF has three dedicated officials—a trainer, a developer, and a facilitator – responsible for nothing but new employee orientation and training. These trainers also provide remedial training for officials to bring everyone back up to speed and routinely put the entire bank through its paces.

Training front-end staff to look for suspicious actions is critical – they’re your first line of observation. For example, say the account of an incapacitated elder is being used for fraudulent purposes by relatives. While the back-end staff might not realize anything suspicious at first, a client services representative could voice concerns that an account holder seems unaware of actions being taken in their name.

The Continuous Fight to Combat Money Laundering

All financial institutions, from large banks to small credit unions, need to be on the lookout for money launderers. By integrating due diligence technology with people training and a robust partnership with law enforcement, banks like TCF can more effectively combat the increasingly sophisticated money launderers in the United States and abroad, helping prevent criminal activity from continuing on their watch.

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