Understand Your BSA/AML Software Alerts
Is your relationship with your AML and Fraud Software provider based on blind trust without data and understanding?
By: Darrin Hanson, Chief Revenue Officer, Banker’s Toolbox
When our Banker’s Toolbox team is talking to Chief Operating Officers, Risk Officers and BSA/Fraud Specialists, we have access to a constant stream of feedback that helps inform our team of experts on the solutions we need to bring to our family of customers. Recently, one trend has reached such volume and frequency that it has affirmed our focus as a risk and compliance solution provider, that the “Black Boxes and Magic Algorithms Do Not Suffice.” We know that, as a BSA/AML or fraud professional, you WANT and NEED to understand your BSA/AML software alerts.
The conversations we hear around this trend sound something like this, “As we have grown, our examiners are increasingly demanding more understanding as to WHY we see alerts on specific transactions, WHICH transactions were involved and WHAT WE THINK IT MEANS. They are requiring that you understand your BSA/AML software alerts. Unfortunately, our AML/Fraud software only provided us a risk score (95! Could be a thing!) without an explanation of what and why.”
These bankers are speaking of a risk score generated BY software based on algorithms that they have no visibility to and formulas they cannot tune. “Recently we received a “95” score on a check-kiting fraud alert,” one banker told us just last week. “We had no understanding of where the 95 came from and were left to sift through dozens of transactions to find supporting reasoning. We didn’t design that score, we can’t change the default thresholds that drove the score and we have no visibility to explain what it all means.”
This is a challenge that several BSA/AML and fraud professionals face today. They have a job that involves an increasingly deep level of understanding and analysis of risk, but sometimes have to rely on software that delivers the results of a calculator. Regulators are explicitly telling BSA/AML professionals, “You must understand your BSA/AML software.”
The analogy that quickly comes to mind is a student being able to use a calculator to perform complex equations but fails the test when they are asked to show their work (to prove that they understand the formula). Maybe that’s why they are called exams…
All kidding aside, our industry needs solutions that provide BSA/AML and fraud professionals the opportunity to deeply understand their customers/members behavior and risks. In order to achieve this, BSA/AML and fraud professionals need to HAVE THE ABILITY to tailor their solution TO ADDRESS WHAT IS UNIQUE about their institution and customer/member base. THIS capability is something that we, at Banker’s Toolbox, offer and is one of our key value propositions.
The BAM+ platform allows users to take control and eliminate the frustrations of having to guess at “the what and the why” of their software. It provides you with all of the information you need to understand your BSA/AML software alerts. Our customers can run a statistical analysis of ALL transactions. They can run reports to see where thresholds should be set for their the risk profile of their institution. Our customers can review all of the scenarios that drive the alerts, and change the parameters and thresholds to match the statistical analysis. As soon as they receive an alert, they can identify right then and there “what it means”, because the transactions show the exact suspicious behavior that is being identified. Our customers can answer honestly when a regulator asks, “Do you understand your BSA/AML software?”. Then — and this is a REAL magic moment — they can slide a report with the statistical analysis and understanding across the table to their examiner and speak with confidence.
When your bank or credit union grows above $1B, your examiners WILL want you to “show your work”, and understand your BSA/AML software by showing the formulas and explaining the concepts. THIS is what our customers value come test time… “I tell BSA and Fraud professionals all the time,” said another customer, “if you have never automated before and just want simple, buy ‘a magic calculator’. When you grow up and need a professional solution, that’s when you call Banker’s Toolbox.” Because a magic calculator can only do so much….