AML:The New Normal
By: Daniel Nagle
In 2014, the International Narcotics Control Strategy Report on Financial Crimes and Money Laundering identified Canada as a “major money laundering country.” For several years in a row, Canada has been identified in this way, and a plethora of news stories suggest that money laundering is rampant in many Canadian casinos.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) began enforcing new requirements and guidelines around money laundering reporting obligations on February 1, 2014. These new changes have increased the regulatory burden and are considered the new normal in the world of anti-money laundering (AML) regulation.
As a result, the gaming industry will see more stringent forms, e-filing processes, and requirements for data capture regarding customers and transactions. These changes require casinos to beef up how they capture and store customer and transaction information and the depth and accuracy with which they report these details. As many casinos continue to largely rely on manual processes—that are time consuming and often less accurate than the new regulations require—these changes necessitate substantial staff training, changes in culture and upgrades to IT.
The most significant amendment to the new requirements is that all customers will have to undergo ongoing monitoring — a significant change to the current regime, which stipulates that only high-risk customers require this. It means that casinos will now have to track, monitor and understand every patron’s behaviors.
Information management and analytics technologies can greatly assist casinos in meeting these new requirements by providing the most accurate, complete solution for detecting, investigating and reporting on potential illicit activity including customer due diligence, suspicious activity monitoring, watch-list filtering and case management.
Improving Data Quality:
Data sets can often be incomplete due to organizations storing data in multiple disparate systems, influx of multiple revenue streams such as earnings from online gaming and in-person gaming, or inaccurate human data capture processes. For instance, it is common for pit bosses to manually record transaction and customer data, but unfortunately, they may submit incomplete records. Under the new regulations, if gaps exist in data, the regulator may impose fines for non-compliance. With technologies to improve data quality, such gaps are flagged before the information is reported to regulating bodies, enabling the organization to avoid penalties. Furthermore, data quality solutions can automatically streamline and cleanse records to help ensure gaps are eliminated.
Gaming is exploding in popularity all over Canada, and along with this growth is increased money laundering. With mass amounts of data, not to mention significant moving parts and regulatory requirements, the process of sorting through data manually is a highly time consuming and cumbersome task. Automated analytics systems enable casinos to monitor and analyze transactions in near real-time, using highly accurate models to flag suspicious behaviour for further investigation, and automatically submit the necessary forms on non-suspect data. This frees up human capital to perform secondary checks on records flagged, rather than wasting time auditing files that may not contain any abuses or manually submitting required forms.
Scalability and Flexibility:
In the gaming industry, regulations and money-laundering tactics are constantly evolving. Casinos should look for information management and analytics solutions that can scale to their needs as business grows, and be flexible enough to enable the business to alter the solution as needed.
In short, moving from potentially error-fraught, human-powered processes to ones based on analytics can drastically improve casinos’ compliance to regulatory reporting requirements, help stop money-laundering in its tracks, and greatly improve efficiencies in the process.
There are many different solutions claiming to do everything, capable of solving every compliance woe, but the majority of these are not true enterprise systems and don’t look at all aspects of the compliance problem. In other words, they leave holes money launderers can exploit.
Advanced solutions provide automated processes for detecting, investigating, and reporting suspicious behavior and apply a risk-based approach to monitoring customer behavior. Using high-performance analytics and multiple detection methods enables an institution to monitor more risk scenarios against very large volumes of data, in less time. Once suspicious behavior is identified, a seamless workflow increases the effectiveness and efficiency of the investigative function. Combining high-performance analytics capabilities with all the essential elements of a successful AML solution – including customer due diligence, suspicious activity monitoring, watch-list filtering, and case management— it allows casinos to:
- Monitor more transactions in less time
- Improve the quality and accuracy of alerts
- Enhance investigation speed and effectiveness
- Identify organized crime rings
- Provide casinos with more complete protection and the ability to meet compliance demands with greater speed and accuracy than ever before.
Generally speaking compliance data becomes the cleanest and most complete data set within any organization, moving away from being a cost centre to being a profit centre when the organization starts to use that information and data in other areas of the business to drive better, more informed business decisions. With mountains of invaluable customer data available, the gaming industry can leverage this information to understand how to target new customers, how to segment customers based on profitability, or understand what the next best offer is for a specific customer.
Analytics gives the casinos the power to know their customer, chart their value over time, as well as anticipate that customer’s behavior. Using analytics, a casino operator can tailor specific, personalized marketing campaigns to each customer in the casino’s patron database. By consolidating the various patron touch point systems throughout the casino property, the casino operator can create a complete view of each patron. By understanding what type of patron is on its property, why they are there, and what they like to do while they are there, casino operators can individualize their marketing campaigns so that these campaigns are more effective, thereby increasing the casino property's ROI.
As Canada continues to advance its AML regulations casinos will most definitely feel the burden of more stringent compliance. In essence, the new regulations will lead to increased customer due diligence that will ensure the institution knows who their clients are. The real winners will be the casinos who enlist the support of analytics to not only offer protection and the ability to meet compliance demands with greater speed and accuracy but use analytics to truly empower the way they market to their customers.
As Financial Crimes Solutions Specialist and leader of the Canadian branch of the SAS Security Intelligence Practice, Daniel Nagle serves as the focal point of knowledge for key business drivers facing our financial landscape with the breadth of technological solutions available to us today.