Professionals conducting Know Your Customer (KYC) and Customer Due Diligence (CDD) are the first lines of defense against money laundering. Their jobs involve collecting the required identifying information on new clients and risk rating the clients based on geography, industry/occupation, product, political status, and reputational risk. These risk ratings are used to determine the frequency that the clients KYC information will need to be updated, as well as to set the thresholds for monitoring future transactions. Clients who are determined to be higher risk are also subjected to Enhanced Due Diligence (EDD). EDD efforts vary greatly across banks, but they generally require obtaining additional documentation on the client and conducting more in-depth research through public and vendor databases into the client’s background.
Once clients make it though the on-boarding stage, the financial institution will usually employ an automated transaction monitoring system to detect any transactions indicative of money laundering or terrorist financing. The alerts generated by these systems are reviewed by teams of analysts to determine the nature of the transactions. Depending on the size of the institution, alerts deemed unusual may be further escalated to investigative teams to review the activity and determine if a suspicious activity report (SAR) needs to be filed. Larger financial institutions utilize several investigative Financial Crime groups, usually specializing in a specific product or line of business.
In addition to monitoring transactions for money laundering, banks also monitor transactions to ensure that they are not facilitating transactions with any OFAC sanctioned countries, entities, or individuals. Sanction departments include several functions that review, report, and determine if transactions run afoul of any OFAC guidelines.
Financial Crime Technology is the behind the scenes group that makes many of the jobs above possible. They can implement, maintain, and fine-tune the databases that store client information, and the monitoring systems that detect money laundering or block sanctioned transactions. The individuals in these roles must have very strong technology backgrounds. Due to the advances in technology and the very specific skill sets needed, this is probably one of the most in demand positions in Financial Crime.
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