The IBA Working Group Report on AML/CFT 2010 : Alert Management

 Summary of Chapter 7: Management of Alerts

The Alerts generated by various sources need to be reviewed before submission as STR. The number of alerts that can be practically meaningfully analyzed will have a bearing on the size of the AML team required for this purpose. The number of alerts to be handled by each case manager/ supervisor, should be the discretion of each financial entity depending on skill available, number of alerts, process and methodology followed for alert review and analysis.

The system should maintain a history of all previously generated alerts that were investigated and earlier alerts should be available during the review process. Consolidation of alerts from different alert scenarios to a case and linking of all related information with the alert would help to assess the overall risk of the case.

To have effective monitoring of alerts generated by the AML software there should be a process whereby the alerts which are more critical and carry higher risks should be taken up first for review.eg.., alerts generated for high risk customer, alerts generated under high risk scenario etc.. Each bank needs to assess, based on its own criteria, whether a particular customer poses a higher risk of money laundering

The alerts generated from the software should be able to show the “triggering” transaction related to the case under investigation , as this will help the officer to understand the nature of the transaction/transaction pattern of the customer . further the risk category of the customer should also to  be checked while reviewing the alerts. The factor which may be considered during the review are:

·         Source of alert and flagged alert indicators

·         Customer profile

·         Risk ratings

·         Pattern of transactions

·         Additional information collected (if needed)

The review of pattern of transaction in the account and other related information provides an insight into intended purpose of the transaction. Examples where such review can assist is meeting the subjective test that “ give rise to a reasonable ground of suspicion” are as under:

 

·         Transaction pattern are not consistent with normal business, personal, remittance or tourist spending activity.

·         The amounts or frequency or the stated reason of the transaction does not make proper business senses or not commensurate with the profile of the customer, say student etc..

·         Large number of transfers received at once or over a certain period of time which are much greater than what would be expected for such a receiver

·         Unrelated sender and receiver

·         Customer who travels unexplained distance to conduct transactions

·         Migrant remittances made outside the usual remittance corridors

·         Personal funds sent at a time not associated with salary payments

The AML/CFT compliance officer and other appropriate staff should have timely access to customer identification data and other CDD information , transaction records and other relevant information

 

The AML officer after carrying out analysis of the case, arrives at a conclusion that the transactions appear in tune with the profile of the customer and does not appear to be suspicious, the alert may be closed as “false positive” with detailed comments on the observations made by the AML officer to arrive at such a conclusion. It is very important that the reasons are recorded to establish that necessary due diligence was exercised while closing the alert in case of any regulatory investigations in the account at a future date.

 

However, if the transactions do not appear in tune with the profile and do not fit in the normal transaction pattern, then such alerts should be flagged off for a detailed review. The documents obtained while opening the account may be reviewed as also additional information of the customer /his transaction may be sought from the branches

 

On the Basis of analysis carried out by the AML officer, the case may be closed either as “Money Laundering investigated-False Positive” or “Money Laundering report filed”. All such cases identified as “Money Laundering report filed” are to be submitted to Principal Officer for his final decision.

 

Cases where suspicion is not established and where further transactions need to be reviewed before taking a decision the account may be flagged off and monitored closely for a suitable period of time before final decision is taken

 

Where information is sought from the branches a turnaround time needs to be laid down for providing revert to the centralized AML Cell. For effective case management , all alerts should be closed within defined timelines. All alerts exceeding the timelines should be automatically escalated to the Principal Officer /his designate

 

There should be a process to review alerts on a sample basis which have been closed as false positive to ascertain the efficiency and efficacy of analysis of the transaction by the officers in the AML Dept. This review should be conducted by the Principal Officer/his designate

 

Each bank may lay down procedure for considering closing of the accounts wherever banks are not satisfied with the operations in the account and where transactions are identified as suspicious. However decision to close down such accounts may be taken at a reasonably high level and after giving due notice to the customer and earning that there is no tipping off to the customer.

Happy Reading

Those who read this, also read:

1. The IBA Working Group Report on AML/CFT  2010 : Alert Generation

2. The IBA Working Group Report on AML/CFT  2010 : Appendices A, B and C

3. The IBA Working Group Report on AML/CFT  2010 : Appendices D & E

4. The IBA Working Group Report on AML/CFT  2010 :  Legal Framework & Risk Assessment

5. The IBA Working Group Report on AML/CFT 2010 : Preparation & Submission of STRs