The 360 Degree Risk-Based AML Model

First published in ACAMS Today, the 360 Degree Risk-Based Investigations Model is the most comprehensive investigative method for containing ML/TF transactions. The process provides consistency in approach, and demands higher-order critical and analytical thinking skills to determine or conclude suspicion of illicit transactions. It also contains the entire flow by delving into next steps such as whether or not to raise a report calling for further investigation.

The model has a holistic approach in conducting a 360 degree review of an account, but only to the extent necessary to address the risk. It also defines terms that are highly specific to the method: Breadth and Depth.

The breadth is concerned with persons connected to a customer whereas the depth is determined by the timeline of a customer’s relationship and the look-back period for their particular risk category.

The trigger

Investigations begin following a trigger event such as the generation of a Suspicious Activity Report or negative news alert. Although the investigative process begins at the occurrence of a trigger event, the path that the investigation will take is based on the amount of information provided.

For example, a SAR is more informative as it will be drafted by a person. There is scope for observations and opinions to be recorded. An alert on the other hand is simply suggestive of foul play and could simply be a false positive.

Due to such disparity early on in the investigation, the trigger should not be used to eliminate any scenarios or possibilities.

Understanding the customer and activity

The basis of KYC rests on knowing your customer’s profile to an extent that includes their associates, family, exposure to political or personal threats, source of income and as much information about the business they operate as possible.

Investigators can gather this information from extensive sources such as internal records, internet searches, sanctions lists and third-party databases.

Customer activity in the context of their profile is more significant than the activity by itself. If the reported activity is in line with the business model, then it is unlikely a complete investigation is necessary.

For example, a business account will typically handle payroll, IT, marketing, shipping costs, overheads, etc. And sometimes these payments may have to be made by wire depending on supplier requirements. Transactions like these fall under the purview of acceptable business practices and shouldn’t be unduly penalized.

Coming to a conclusion

Those transactions that could not be eliminated in the context of normalcy are liable to further investigation. At this stage, it is important to revisit the trigger event. Using indicators the investigator can establish the predicate offense and determine whether the transaction was indeed an attempt to launder.

Reporting and the future of the relationship

In the final stage, the model directs investigators to conclude the investigation by submitting an SAR, and to also consider terminating the customer relationship if they are deemed too risky.

The final word

The holistic approach to AML investigations involves a lot of the same questions as with KYC/CDD. This tells us that the customer profile is the key to preventing AML.

At the end of the day, investigators have to answer the most important question of all: Does it make sense?