Objective

Design and implement a wholescale remediation program for a London-based bank holding company whose AML Transaction Monitoring process was found to have deficiencies.

CRISIL's Solution

CRISIL partnered with the client to design and implement an AML Transaction Monitoring Remediation and Transformation Program, including the development and validation of the current standardised customer segmentation model, development of a methodology to determine thresholds for each segment, and the creation and validation of scenarios to generate alerts and transactions by tuning the parameters for thresholds. The CRISIL team accomplished this task with the following steps:
 

1. Segmentation validation

• Generalised validation framework
  
  • Developed a suite for validating the segmentation model for standardised segments and risks for different portfolios
    
  • Gained in-depth understanding of various input parameters for different portfolios to derive common 'plug-in' solutions for validation tasks
    
• Automated reports
  
  • Produced automated validation reports for portfolios
    
  • Automated deep dives for root-cause analysis for segmentation validation failures
    
  • Provided scalable reporting aspects to monitor/include additional KPIs
    
• Threshold review & tuning
  
  • Determine relevant basis population for each scenario based on
    
    • Transactional level scenarios
      
    • Non-transactional level scenarios
      
• Derive and validate thresholds based on tunable parameters to ensure alert rules for scenarios are met
  
• Establish a QC process to verify the threshold bands selected and analyse events and alerts generation
  

2. Scenario testing & tuning

• Scenario development/modification based on the following parameters (not extensive)
  
  • Customer segment
    
  • Geographies, channels and risk levels
    
  • Line of banking business
    
  • Amendable transaction patterns
    
• Scenario validation to confirm
  
  • Business requirements, specifications and transaction/alert counts are met within the select scenario
    
  • Coverage and redundancy aspects between scenarios
    
• Develop a threshold table for each scenario to analyse or modify parameter thresholds based on feedback

Client Impact

• The implementation was completed globally across countries, with integration of local regulations.
  
• The bank met all timelines for the validation.
  
• The suite of tools developed could be reused (with little or no modifications) for future validation exercises.
  
• Risks associated with failed segments were quickly mitigated.
  
• Coverage redundancy reduced due to improved segmentation and scenario tuning.
  
• False positives reduced by 5% due to threshold tuning.
  

Questions

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