The false positive paradox
Money launderers work hard. They’re constantly beavering away to dress their activities in the clothing of innocuous transactions. The best way to hide dirty money on its journey through the world’s financial systems is to make it look as legitimate as possible. From their perspective, the more false alarms raised against legitimate transactions, the thicker the smokescreen for their illicit activities.
There’ll always be situations where perfectly normal transactions get flagged as suspicious; False Positive alerts will never leave us, and dealing with them is part and parcel of life in a compliance department. But the False Positive problem becomes critical when the volume of transactions increases, as it’s been doing for several years now, just as launderers up their game and regulatory reporting requirements get more time and labour-intensive.
Combined, these things inflate the number of false positives, and this is reflected by a tandem increase in the volume of SARs filed with regulators, overloading the staff of regulators and Financial Intelligence Units (FIUs) and the law enforcement agencies that rely on SARs for their work.
Regulators realise that while their resources remain constrained, financial institutions
Clarity amidst the reporting crunch
There are several solutions to this problem, and they’re all clustered around the way we share intelligence. The challenge with many fixes for complex, systemic problems is that even if everyone’s in agreement, change takes an enormous amount of time and effort. That’s why we propose both immediate short-term steps and longer-term measures that you can embrace to support sustained change.