AML Investigations and Case Management: The Complete Guide

If millions of dollars moving quietly through the financial system, slipping past controls, bouncing across borders, or hiding in plain sight, these funds might seem legitimate, but in reality, they’re often linked to crimes as serious as drug trafficking or money laundering.

Financial institutions have a big responsibility in preventing those crimes, especially money laundering. That’s where AML investigations come in. They’re a set of actions and processes used to spot, investigate, and report suspicious activities before they turn into serious issues.

If you’re working in a bank or financial institution, knowing how to manage these investigations is essential. It’s about protecting your institution, following the law, and, ultimately, keeping the financial system safe and clean.

What is an AML Investigation?

An AML investigation is a process to find and stop “dirty money” from flowing through the financial system. So, when people try to make illegal money look clean as if it came from a legal source, what they actually do is that they move this money around in tricky ways, trying to hide where it really came from.

And it is the duty of financial institutions like banks and insurance companies to find and stop these suspicious activities.

What is AML Case management?

AML case management is the broader workflow for organizing, tracking, and managing all alerts and cases of suspicious financial activity. It provides a structured way to handle multiple cases, assigning tasks, setting deadlines, and documenting actions so the team stays organized and compliant. It serves as a “hub” where potential cases are managed and monitored.

What Triggers AML Investigations?

AML investigations aren’t random, on the contrary, they start when certain activities or patterns in customer behavior look suspicious or just don’t add up. Here’s a breakdown of some of the main activities that can set off an AML investigation:

1. Strange Transactions

When a customer’s spending or transfers suddenly change, it might look a little suspicious. For example:

• If a customer who normally makes small deposits suddenly makes a huge cash deposit or big transfer.

• When large amounts are split into smaller chunks, which is sometimes called “smurfing”, to avoid limits.

• Any big shifts in the amount or type of money being moved, especially if it happens all at once.

Basically, if the transactions don’t match what we’d expect from that person, it might be worth a closer look.

2. International Money Moves or High-Risk Countries

When people transfer money across borders, especially to jurisdictions with weak money-laundering controls, it can raise concerns. Criminals often move money around the world to cover their tracks, so sudden international transfers might trigger a check.

3. Cash-Heavy Businesses

Some businesses, such as restaurants or car washes, deal in cash all the time. But if a business like this suddenly shows high volumes of cash without a clear reason, it might seem suspicious and could get a second look.

4. Weird Account Activity

Sometimes accounts are used in strange ways, ways that don’t seem to have any real purpose, like:

• Accounts with many deposits that are round numbers (e.g., exactly $10,000), this can look like someone trying to stay below reporting limits.

• Accounts that open up, have a burst of activity, then close suddenly.

• Accounts that just receive and send money with nothing else in between, often called “funnel accounts”.
  

5. Public or Political Figures

People in government or other public roles are called Politically Exposed Persons (PEPs), and they can be at higher risk for things like corruption or bribery. Financial institutions keep a closer eye on these accounts, so any unusual activity might trigger an investigation.

6. Connections to Known Risky Groups

If a customer or account is linked to a person, group, or company already flagged for suspicious activity, this alone might trigger a deeper look. These connections could include criminals, shell companies, or groups on government watch lists.

7. Frequent Account Transfers

Moving money between accounts constantly can look like a tactic to confuse or cover up the source of funds. This type of movement is known as layering in money laundering and can quickly raise red flags.

8. Big Life Changes Followed by Financial Changes

Sometimes when people have major life changes, such as moving to a new country or starting a new job, their finances change too. But if the money flow changes in a way that seems too sudden or too big without a clear reason, it might prompt a closer look.

How Does AML Investigation Work? Step-by-Step Process

An AML investigation usually follows a clear structure to ensure accuracy and AML investigations are key for staying organized and making sure each case is handled thoroughly and legally.

Here’s an AML investigation step-by-step guide:

1. Case Start: The case starts with a trigger or alert. This could come from an internal monitoring system or be flagged by an employee.

2. Gathering Data: Next, the AML investigator collects all relevant data, like KYC documents, past transactions, and any related SARs.

3. Digging Deeper: This is the AML investigation part.

• Transaction Analysis: Following the trail of transactions to see if the money has been moved around to hide its origin.

• Customer Contact: In some cases, the anti money laundering investigator may need to reach out to the customer to clarify what’s going on.

• Risk Level Assessment: Once they have the facts, the AML investigator assigns a risk level to the case.

4. Reporting: If the AML investigation process finds suspicious activity, a report (usually an SAR) is written up and sent to the authorities.

5. Case Closure: Once all the work is done, the anti money laundering investigator closes the case. If there are any risks, the case might be escalated or flagged for future attention.

What is an AML Investigator?

A money laundering investigator’s job is to watch for these suspicious activities, trace them, and report their findings to ensure that money laundering doesn’t go unnoticed.

AML fraud investigators need good detective skills, knowledge of financial regulations, and tools to analyze data. Certifications like CAMS (Certified Anti-Money Laundering Specialist) or CFE (Certified Fraud Examiner) can be very helpful in this career.

Here’s what money laundering investigators typically do:

1. Transaction Monitoring: Looking closely at unusual transactions or sudden large transfers, especially if they’re cross-border or from one jurisdiction to another.

2. Know Your Customer (KYC): Reviewing customer information to make sure it aligns with the transaction activity. Any unusual behavior may be a red flag.

3. Suspicious Activity Reports (SARs): Writing up reports on suspicious findings to share with regulatory authorities.

4. Collaborating with Law Enforcement: In some cases, working with law enforcement to help investigate these crimes further.

How AML Investigators File a Suspicious Activity Report

Filing a Suspicious Activity Report (SAR) is a critical step for money laundering investigations, especially when AML investigators identify potentially suspicious transactions or behaviors. Here’s a straightforward overview of the process (Fo a more detailed view on SARs, please read this guide):

1. Identify Suspicious Activity: The first step is recognizing transactions or patterns that seem unusual or potentially linked to money laundering or other illegal activities. This could include sudden large transfers, unusual cash deposits, or activity that doesn’t match the customer’s profile.

2. Gather Information: AML investigators collect all relevant information about the suspicious activity. This includes transaction details, customer identification, account information, and any supporting documentation that can help clarify the situation.

3. Complete the SAR Form: Investigators fill out a SAR form, which typically includes:

• The identity of the person or entity involved.

• A detailed description of the suspicious activity.

• The date and amount of the transactions.

• Any relevant facts that support the suspicion.

4. Submit the SAR: The completed SARs from the anti money laundering investigations are submitted to the appropriate regulatory authority, such as the Financial Crimes Enforcement Network (FinCEN) in the United States or the Saudi Central Bank in KSA.

AML Investigation Challenges

AML case investigation processes can be challenging, and these are some common issues that AML investigators face:

• Incomplete or outdated information

• Cross-border transactions

• Limited resources

The Role of Technology to Improve AML Investigations

AML programs financial institutions utilize a lot of technology to help with detection and analysis, and the difference this technology makes is huge! However, it is important to know that not all tools have the same positive impact on AML investigation processes for example. Choosing the right tool for your business and money laundering investigation processes is crucial.

• AI and machine learning tools look for suspicious patterns and help AML investigators find issues faster than manual work alone.

• Data analytics can sift through large sets of data, showing links and trends that might otherwise go unnoticed.

• Case management tools help investigators organize their work, keep track of cases, and ensure there’s a clear audit trail.

Best Practices for Stronger AML Investigations

There are several strategies that can make AML investigations more effective:

Focus on High-Risk Areas: Concentrate resources on high-risk transactions or customers for more effective monitoring.

Regular Training: Keeping AML teams up to date on the latest money laundering techniques and regulatory changes is essential.

Collaboration Across Departments: Investigations can benefit from insights and resources across departments.

Data-Driven Decisions: Using analytics and AI to focus on data can improve accuracy and reduce unnecessary work on false positives.

Final Thought

New tactics emerge as quickly as regulations are put in place and this is one of the challenges that AML investigators face. But also, every AML investigation is an opportunity to catch a criminal or a group of criminals.

So, let’s embrace the challenge; equip yourselves with knowledge, harness innovative technology like FOCAL AML Compliance solution, and foster collaboration within your institutions, to transform AML investigations from a reactive response to a proactive shield against financial crime.

FAQs on AML Investigations:

Q1. How long does a money laundering investigation take?

It depends on the case. Some can be resolved quickly, but others, especially complex, cross-border ones, can take months.

Q2. What’s an AML case management tool?

A case management tool helps organize, document, and track AML cases from start to finish. It can be seen as a workflow system for AML investigations.

Q3. Why are AML investigations important for compliance?

AML investigations help institutions follow the law, avoid fines, and protect their reputation.