Implementing Anti-Money Laundering and Know Your Customer Managed Services Solutions using Robotic...

Implementing Anti-Money Laundering and Know Your Customer Managed Services Solutions using Robotic Process Automation

David DeLeon, AML Managed Services Offering Lead, North America, Accenture

Philippe Guiral, Financial Crime Lead, North America, Accenture

Melanie Hilley, Global Director of Legal Services for AML and CTF, Accenture

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Anti-Money Laundering (AML) and Know Your Customer (KYC)

Managed Services Solutions

Copyright © 2016 Accenture All rights reserved.

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The financial services industry is experiencing increased scrutiny, prompting institutions to rapidly evolve their AML and KYC programs


1. United States Government Accountability Office - Fines, Penalties, and Forfeitures for Violations of Financial Crimes and Sanctions Requirements Report – March 2016

External Environment• US Department of the Treasury Financial Crimes Enforcement Network (FinCEN)

Customer Due Diligence Rule -- requiring Beneficial Ownership • Since 2009, financial institutions assessed about $12 billion in fines for violations

of the Bank Secrecy Act (BSA) and AML regulations and U.S. Sanctions requirements1

Internal Environment• Expansion of policies and standards – examples include (but not limited to):

o Capture and verify additional AML/KYC information on their clientso Update AML/KYC information on a periodic basiso Expand reviews to include relationships across business lines

• Significant increase in operational volumes• Aging IT systems/infrastructure, with heavy reliance on manual processes• Large and rising cost of AML/KYC compliance

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Though organizations are focused on increasing the rigor and scope of their AML/KYC functions, many are struggling to expand their operations accordingly

Barriers to Improving AML and KYC• Unsustainable Processes

o Simplificationo Reliance on manual Processeso Understanding complexity of

process

• Skilled Talent Shortageo Increased locations

(near-shore/offshore)o Integration of global teams

• Insufficient Trainingo Role-based trainingo Incorporating Feedback and

lessons learned

• Inconsistent Qualityo Quality metricso Sampling calibrationo Continuous improvement


Addressing these issues calls for new approaches, including, in many cases, adapting a managed services model for AML and KYC functions

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Access to Skilled Talent

Cost Reduction

Increased Scalability

Improved Quality

Scalable and cost efficient operating model with a variable cost structure – focused on continued cost reduction

Expedited completion – leveraging follow- the-sun capabilities

Access to wider talent pools and lower cost locations

Resource flex options (ramp up/down), alignment of skill/cost to work complexity

Embedded training and development capabilities

Confidence through early identification and feedback focused on common issues

Balanced approach by calibrating sampling based on performance (e.g., reduced review for higher performers)

A culture of quality by incorporating quality into performance management

Standard, efficient and repeatable approach to managing AML at scale

Improved transparency into operational productivity, quality, and capacity and forecasting

Building a global AML/KYC capability

Organizations considering migration to this model should focus on defining their scope and transformation journey

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AML/KYC Managed Services Suitability

Operational VolumeLow High

Low

High

Pro

cess

Com

plex

ity

Client (CDD) Onboarding

Negative News

Transaction Monitoring Investigations

Periodic Review / Client Refresh (CDD)

Politically Exposed Persons

1

2

35

7Sanctions & OFAC (Transactions)

5

Highly Desirable

Potentially Desirable

6

Least Desirable

Transaction Monitoring Alert Review

Sanctions & OFAC (Client)

4

Source: Accenture, September 2016

Scope Selection Factors

• Increased Suitabilityo Lower

complexityo Higher volume o Lower AML risk

• Other Considerationso Customer

typeso Customer

interaction points

CDD: Customer Due DiligenceOFAC: Office of Foreign Assets Control

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Quickly and effectively address common challenges by taking advantage of preferred industry practices and proven approaches

Prepare and Transition to a Managed Services model• Process

o Standardization of processes and procedures

o Process hand-offso Complexity/effort required

• Training o Role basedo Conducting training and ongoing

support

• Location(s)o Selection criteriao Balancing resource skills with costs

• Mobilization o Transition and ramp-upo Peer grouping/coaching

• Quality o Measuring progresso Continuous improvemento Accreditation


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Audience polling question #1


Which factor do you think would have the largest impact on the sustainability of your AML or KYC operations?

A. ___ Optimized/Automated ProcessesB. ___ Greater Access to TalentC. ___ More Effective TrainingD. ___ Robust Quality Program

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Robotic Process Automation(RPA) for AML/KYC


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What is robotic process automation (RPA)


Robotic process automation (RPA) is the application of technology to “mimic” the actions of a human.

A bot logs into the same applications and does the same tasks as a person. But the bot captures all details of the process and stores the details for potential auditing later.

ApplicationDatabas

eSystem

WebsiteSAP

Accenture Technology Vision 2015 Survey

78% believe that the new workforce will consist of employees as well as intelligent machines

Accenture Technology Vision 2015 Survey

84% of bank executives surveyed agree that they will need to focus on training their machines as much as their people

30% lower total cost of ownership for business operations by 2018 due to use of smart machines

30%

Gartner Reveals Top Predictions for IT Organizations and Users for 2015 and Beyond, October 7, 2014

Expect 35% of jobs will be automated in the next 10-20 years

35%Will a robot take your job?, BBC News, September 11, 2015

84%

78%

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Robotics value proposition


Robotics can deliver payback on investment in about 3 - 6 months when implemented at scale.

Increased productivity with the potential to operate 24/7 - less FTEs needed to complete repetitive tasksApproximately 6 weeks required for a cost-effective implementation

Higher staff satisfaction by eliminating monotonous tasks and allowing individuals to focus on higher value work

One “bot” equates on average to 3 – 5 FTEs

at 1/3 of the cost of an offshore resource

Consistent quality guaranteed as human

error is eliminated

New operational ability to dynamically manage resource capacity and address peak volumes

ImpactsBenefits

Operational Control

Productivity

Implementation

Satisfaction

Quality

Costs

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Which processes are suitable for robotics?


Defining robotics opportunities starts with an assessment across existing business processes, using a set of process, technology and risk feasibility criteria.

Rule based/no human judgment

Digital trigger and structured, digital data

High human error likelihood

Highly manual

High volume

1 or more systems

Not frequent changes in process steps/rules

Low exception volume

Automated Workforce

Criteria

RPA opportunities for AML/KYC functions

13Source: Accenture, September 2016

Robotics can be introduced to multiple AML/KYC processes. While further review of processes should be conducted to determine full scope, initial actions can reduce cost, increase efficiency, and improve quality for the processes listed below.

RPA Suitability for AML/KYC Functions

Operational VolumeLow High

Low

High

Pro

cess

Com

plex

ity

Client Onboarding (CDD)

Sanctions & OFAC (Client)

Negative News

Transaction Monitoring Investigations

Periodic Review / Client Refresh (CDD)

Politically Exposed Persons

1

2

5

46

9

Sanctions & OFAC (Transactions)

7

Highly Desirable

Potentially Desirable

Transaction Monitoring Alert Review8

Least Desirable

Client Offboarding (CDD)

3

• Compiling customer information

• Confirming open accounts, accounts on prohibited list, etc.

• Validating existing client information

• Documentation gathering

• Gathering customer information

Refresh• Low complexity refresh• Medium complexity refresh• High complexity refresh

Onboarding/CDD• Client set up• Onboarding• Enhanced due diligence

Screening• OFAC screening• PEP screening• Negative news screening

Offboarding/ Reporting

• Offboarding• Ops metrics reporting

Opportunities for RPA

• Searching multiple internal sources for open accounts

• Generating progress reports, exception reports, and Quality Assurance reports

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Is your organization planning to implement RPA for Financial Crime processes?

A. ___ NoB. ___ Not yet, but we are planning to C. ___ Yes, we are currently doing a proof of conceptD. ___ Yes, we have already implemented RPA

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Regulatory Considerations for implementing Managed Services


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Regulatory considerations for implementing managed services (1/3)


When engaging a managed services provider to assist your organization in meeting its KYC requirements, the following questions can help you address key legal issues.

Regulatory Approvals

Risk Assessment

Accountability and Discretion

• Have you identified the reasons for outsourcing?• Does the managed services provider have the experience and technical,

managerial and operational capabilities to carry out the tasks?• Is the managed services provider compatible with your corporate culture?• Is the managed services provider reputable and financially sound?

• Does the outsourcing plan clearly demonstrate that ultimate responsibility for compliance with KYC requirements remains with your organization?

• Is your managed services provider carrying out KYC steps according to your directives as opposed to exercising its own discretion in dispositioning cases?

• Do your regulators require you to obtain specific approval to outsource certain functions to a managed services provider?

• Have you identified what your requirements are and worked with your proposed managed services provider to address them, including risk assessment and establishing an outsourcing plan?

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Governance and Supervision

Data Considerations

Contingency Planning

• Have you established clearly defined mechanisms to monitor and supervise the performance of the managed services provider?

• Are the roles related to quality assurance appropriately divided between your organization and the managed services provider?

• Does the outsourcing plan address confidentiality and protection of customer data?

• Have you coordinated and documented business continuity and disaster recovery plans with your managed services provider in the event of an emergency?

• Does the outsourcing plan allow both your organization and your regulators to access data at any time?

• Have you identified the availability of alternative providers or the possibility of bringing the outsourced activity back in house in the event of an emergency, and the costs, time and resources that would be involved?

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AML Client Compliance Directives

Off-shoring

Contractual Provisions

• Have you established client compliance directives for the managed services provider that allow you to meet your AML regulatory requirements, including adherence by the provider to applicable provisions of your AML policies, agreement that their employees will take your AML training, with instructions on how to identify and escalate a red flag, and record keeping instructions?

• If offshoring is contemplated as part of the outsourcing plan, have you addressed whether regulatory approval is needed from your home country or the offshoring country?

• Do the offshoring country’s local laws allow your home country’s regulatory bodies to access data?

• Have you established a written agreement between the parties that documents all elements of the outsourcing plan?

• Have you addressed key legal items such as dispute resolution, governing law, liability, indemnities, change management, background checks and licensing of technology?

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Has the increase in enforcement actions and significant fines imposed for sanctions violations caused your organization to re-evaluate its KYC processes?

• ___ Yes• ___ No• ___ Not yet, but there are plans to do so

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Key takeaways


• Adapting a Managed Services approach for AML and KYC functions can quickly and effectively reduce costs, increase quality and improve scalability.

• When considering migration to this model, itis critical to focus on defining the scope and Transformation Journey of the transition.

• Robotic Process Automation can deliver return on investment in about 3 - 6 months when implemented at scale.

• Robotic Process Automation gives you an agile workforce available to deliver capacity to scale at a moment's notice.

• Understanding the Regulatory considerations for outsourcing AML and KYC functions to a managed services provider will help protect your organization from regulatory scrutiny.

• Establishing an outsourcing plan and contractual provisions will provide clarity between you and your managed services provider on the scope and parameter of the services being outsourced.


For more on AML/KYC Managed Services, read our point of view:

Anti-Money Laundering and Know Your Customer Programs: Sustainability through Managed Serviceswww.accenture.com/us-en/insight-anti-money-laundering-know-your-customer-managed-services

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https://www.accenture.com/us-en/insight-anti-money-laundering-know-your-customer-managed-services?c=fs_frdfincrmsldshr_10000009&n=smc_0816

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Implementing Anti-Money Laundering and Know Your Customer Managed Services Solutions using Robotic Process Automation


Disclaimer:

This presentation is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 375,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com

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