Reporting Entities across New Zealand are experiencing increased regulatory scrutiny, prompting organisations to rapidly evolve their Anti-Money Laundering (AML) programs. One approach that is proving popular is the managed service model, or compliance outsourcing.
Organisations are now expected to capture and verify additional AML/KYC information on their clients, periodically update AML/KYC information and expand reviews to include relationships across business lines.
As a result, we are seeing organisations experience admnistrative volume increases of as much as 25 times. These increased volumes, compounded by non existent or aging IT systems and processes, contribute to the large and rising cost of AML/KYC compliance, spanning core functions including:
· Customer due diligence at Onboarding;
· Remediation and on going compliance due diligence;
· Enhanced due diligence including PeP’s, Sanctions, Adverse Media and Close Known Associates;
· Transaction monitoring and suspicious activity investigation; and
· Task management and reporting.
When faced with the ‘heavy lifting’ of this level of complex administrative compliance work, which is most cases does not differientate the client in the eyes of their customer, but instead adds to the cost of doing business….many are calling for new approaches, including, in many cases, adapting a managed services model for AML compliance.
· A scable and cost-efficent operating model with a variable cost structure.
· Outcomes range from a 20-60% reduction in overall cost to comply.
· Expedited completion to onboard equates to faster service turnaround times.
· Access to wider talent pools and lower human captial costs.
· Resource flex options (ramp up/down) and alignment of skill/cost to work complexity.
· Embedded training and development capability.
· Standard, effective and repeatable approach to managing AML compliance at scale.
· Improved transparency into operational productivity, quality, capacity and forecasting.
· Leveraging a global AML/CFT capability.
· Confidence through early identification and feedback focused on common issues.
· Balanced approach by leveraging global best practise based on performance.
· A culture of quality by incorporating quality into performance management.
Such an approach can quickly and effectively address common challenges by taking advantage of preferred industry practices and proven approaches. Organisations considering migration to this model should focus on three main areas:
A critical first step in transitioning to a managed services model is selecting in-scope functions. In our experience, the greatest value can be realised by focusing on functions that are less complex and involve high volumes of work or where the risk to your business is too high to place these functions with unskilled staff.
For example, where the opertional volume is high but the process complexity is low such as periodic review and refresh of CDD could prove a highly desireable function to outsource to remove the pressure off staff. Similarly where the operational volume is low but the process complexity is high, such as suspicious activity monitoring and investigation, it may be that the outsourcing of this function is highly desireable to ensure appropriately skilled staff are available to manage in real-time.
Once your key in-scope functions have been identified the following steps are critical to a seamless transition:
Standardisation and simplification of operational processes and procedures is critical. Desktop procedures should break down the precise steps needed to execute the process and non-value-added steps should be removed. There should be a clear understanding of where the processes start and stop, and if any handoffs between groups are required. Case management and/or workflow tools can be utilised to reduce productivity impacts related to handoffs. The complexity of each operational process should be understood and tiered to allow for alignment of work, and manual processes should be identified and automated where possible.
It is paramount to the success of the programme that data security, governance, and transparency of offering are all clearly mapped out and understood by all parties.
Training should be updated to become role-based, with the level and depth of training commensurate to the processes staff are to perform. This approach should give staff the baseline knowledge to adequately perform their duties. Training should provide coverage across the core AML program, the organization, and the processes and systems to be used. Process subject matter specialists should be aligned to lead training sessions, especially at the beginning of the transition.
A detailed execution plan outlining knowledge transition and ramp-up schedule is essential. A ramp-up schedule provides the ability to progressively add, and reduce, resources as demand requires. This approach also ensures a transparent approach to cost forecasting across the service allowing customers to plan for peaks and troughs.
Establishing quality processes is a critical step in maintaining control of the overall programme. Dashboards should be in place to measure and communicate progress, as well as to identify common problem areas that may yield opportunities for continuous improvement.
After migrating to managed services, further efficiencies can be gained through ongoing improvement efforts. Processes should be analysed to determine bottlenecks or activities with lower performance to identify opportunities.
With all parties working closely together, and reviewing service level agreements and key performance indicators, improvements can be managed in real time with a significant uplift in ROI as well as providing the foundation for an agile service which can flex as the customer desires.
As organizations increase the size and scale of their AML/CFT operational units to meet heightened requirements, many are seeking opportunities to scale their operations and drive additional efficiencies.
They can accelerate their progress to sustainability by taking advantage of Dimension GRC’s AML/CFT managed services solution.
Through managed services, organisations can lower costs, drive higher quality, and increase flexibility.
Whether you are a small to medium sized organisation or a large enterprise based entity with multiple offices and global reach – a managed service can provide operational agility across all areas.
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