The rise of goAML reporting and the impact of data quality

As of June 2017, all reporting entities in Ireland are required to submit their regulatory reports, such as suspicious transaction reports (STRs), electronically to the Irish Financial Intelligence Unit (FIU) using the goAML portal. This is part of a global trend where regulators are standardizing reporting platforms, and represents a significant shift in how jurisdictions are monitoring money laundering or terrorist financing activities.

Developed by the United Nations Office on Drugs and Crime (UNODC), goAML is intended for use by FIUs as a means for gathering regulatory reporting information, and for allowing regulatory reporting entities and intelligence authorities to quickly, securely and confidentially analyze and share information that can help identify criminal activity. Reflecting this global commitment to reduce money laundering, the financing of terrorism and other financial crimes, more than 50 member states have already adopted or are evaluating the goAML solution.

Reach and impact of goAML regulatory reporting

The goAML solution performs three major functions:

a) Collection of suspicious transaction reports (STRs), currency transaction reports (CTRs), electronic funds transfer reports (EFT)

b) Analysis of data using rules-based analysis, risk scores and profiling

c) Dissemination of information, including escalations to law enforcement

One important benefit of the goAML portal is that it eliminates the need for reporting entities to submit paper reports. This not only reduces the cost and time for filing, it also gives FIUs the information needed to detect potential criminal activity and exchange information with financial institutions, law enforcement and judicial authorities.

However, for goAML to be an effective tool, it is imperative that data submitted is complete, thorough and accurate. Given that the UNODC has taken a clear view that regulators are not responsible for data quality issues, it falls to financial institutions to ensure that they collect the appropriate data and verify its quality.

Improving data quality for better reporting

To avoid spending additional time and effort correcting data quality issues – as well as to prevent fines and penalties from regulators that may arise as a result – it is essential to take proactive steps. To this end, financial institutions must continually invest in improving the quality of their data, particularly customer information. While many organizations collect customer data during onboarding to meet know your customer (KYC) requirements, it is clear that there are significant gaps in how the information is maintained and kept current. 

There are several areas where technology can be leveraged to improve the quality of data recorded by financial institutions. These include customer due diligence, sanctions screening and suspicious activity monitoring.

Data quality and customer due diligence

When a financial institution completes its KYC process and onboards a customer, it must first identify and verify the customer. Completing customer due diligence (CDD) will not only verify the customer’s identity but also establish a baseline of what is normal activity for the customer, and assess their associated risk.

To improve the quality of data, financial institutions may utilise data analytics to determine if all information was verified and that policies were complied with during the CDD phase. These analytics help ensure that:

a) CDD is complete and accurate

b) New customer data is logical (e.g., that social security numbers have the right number of digits)

c) Accounts have gone through periodic CDD refresh

d) Customer information is updated based on the customer risk profile, including anti-money laundering (AML) risk, with higher-risk customers being updated most often

e) Each account’s risk has been assessed and deemed as high, medium or low for AML risk, which then determines the level of CDD to be conducted

Role of sanctions screening in data quality and risk management

Before opening an account for a customer—or at least shortly after—financial institutions need to screen customers against sanctions lists to determine if they are a high-risk client, such as a politically exposed person (PEP). Customers should be screened during onboarding in real-time, and then periodically. Data should be verified against both internal lists as well as external lists (e.g., OFAC, UN, EU, OSFI, UK and AUSTRAC) and third-party PEP and sanctions lists (e.g., Dow Jones and Thomson Reuters World-Check Database).

Poor data quality, poor suspicious activity monitoring

Monitoring for suspicious activity is directly impacted by poor data quality. For transaction monitoring systems to be effective, they require as much information as possible about the customer, accounts, products, financial institutions and jurisdictions involved.

If KYC data from multiple branches of a financial institution are not fed into a single database and scrubbed for accuracy and consistency, it is possible to miss linking transactions that suggest a pattern of money laundering. Even tiny issues like missing fields, added punctuation, abbreviations and misspelled names can make it difficult for an AML system to detect transactions that require reporting.

Aside from poor internal customer data, when dealing with correspondent banks or non-traditional financial institutions like MSBs, these institutions may have missing, inconsistent or duplicate data, or have a variety of typographical errors from manual entry that may lead to poor data quality and overdue regulatory reports.

In both cases, technology solutions can help identify and fill in gaps in data as well as correlate multiple transactions that, once aggregated, exceed reporting thresholds and must be reported.

Improve data quality, decrease regulatory reporting problems

By taking steps to improve the quality of their data, financial institutions can mitigate potential fallout, including fines and penalties for failing to meet reporting requirements, as well as added time and effort to update and revise reporting data. With more FIUs around the globe adopting the goAML solution, and the growing global commitment to detecting, preventing and ultimately reducing financial crimes such as money laundering and terrorist financing, high-quality data is quickly becoming more – if not the most – important aspect to any financial institution's AML compliance program.

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