Fraud and AML Departments: Better Together?

Should Fraud and Anti-Money Laundering Combine their Efforts?

Where there is fraud, there is often money laundering. The links between the two can be quite clear. After all, criminal activity related to fraud produces funds that must later be laundered. The relationship between fraud and money laundering is causing financial institutions to wonder – Should fraud and AML efforts be together or separate?

The answer is not so simple. Every financial institution is different. In some cases, fraud and BSA/AML compliance are grouped together in a single department. For example, a recent Banker’s Toolbox survey showed that over 73% of financial institutions organized fraud and AML under the same management umbrella. On the other hand, some fraud and AML departments are so segregated that they barely even communicate.

So if the two are related, why the discrepancy? Should they combine their efforts?

In the Q&A portion of our recent webinar, 20 Minute AML Investigations, law enforcement official Steve Gurdak said, “Most of your institutions have the two sides… you have the fraud people and the SAR people.” He continued, “Sometimes I wish they were together.” This concept caused one attendee to question, “Our departments are separate, but I was wondering if that was a regulation or stated in a specific document as a recommendation?“

There is no specific regulation that specifies whether fraud and AML should be together or separate. However, some regulatory agencies have been recommending that institutions combine the two for efficiency. Having two different groups doing an investigation and possibly filing a SAR on the same customer is not only inefficient, but it also means neither side is necessarily looking at all the pertinent data and making an informed decision. 

The decision on whether or not to combine fraud and AML is a difficult one. The answer depends on an institution’s needs, infrastructure and resources. However an institution decides to organize the two, one common truth remains: the teams must communicate.

A 2011 article published in ACAMS Today laid out the two options: combining or collaborating. In both cases, the author suggests having one common case management system that both teams can use. If the teams are separate, they can easily hand off cases to one another. If the teams are together, the system can be set up to monitor for both AML and fraud-related hits. The case management system provides an easy way for AML and fraud to eliminate communication barriers.

Another strategy in creating a stronger relationship between fraud and AML is thorough training. Training “financial crimes specialists” who are well versed in all areas of BSA/AML and fraud can be an advantage. The more knowledge, the more awareness of various red flags.

There is no right or wrong answer on whether AML and fraud should be together or separate. In fact, both situations can be challenging. However, when deciding how to structure these teams, effectiveness must not be compromised for the sake of savings. Opt for a solution that facilitates communication, collaboration, efficiency and effectiveness.

To learn more about the fraud solutions that integrate seamlessly with the BSA/AML case management platform of BAM+, click here.