AMLaaS: Why It Makes Sense for Midsized Banks

Compliance places an increasing burden on banks of all sizes. Acquiring the latest technology to effectively detect and deter financial crime requires a significant investment for many financial institutions. At the same time, though, retaining legacy anti-money laundering (AML) software is not a cost-effective solution. These dated systems often result in a lot of false-positive cases that AML teams need to investigate one by one, and doing so can lead to soaring compliance costs as well as bottlenecks in the process.

Banks are actively looking for ways to reduce the cost of their AML and financial crime and compliance (FCC) programs without compromising the security and safety of their establishments. This is one of the many reasons why midsized financial institutions are expressing more openness to anti-money laundering software as a service (SaaS) solutions. According to a 2019 survey by the research group Celent, 34% of all AML transaction monitoring systems are conducted offsite using SaaS. About 2/3 of this number is hosted on cloud, with the remaining 1/3 handled by provider-hosted systems. This figure is expected to grow as the cost of compliance is predicted to increase by 16% between 2020 and 2021.

What is AMLaaS and Why Is It a Great Fit for Midsized Banks?

Anti-money laundering as a service (AMLaaS) is a cloud-based AML solution that third-party service providers offer to financial establishments. Through AMLaaS solutions, banks can run their AML functions using their provider’s resources, which means that banks have the option to forgo acquiring and maintaining their own AML program. Depending on their agreement, the solutions provider can ensure that their clients have access to the latest AML technologies and strategies for as long as they are subscribed to the service. Some third-party providers offer cloud-based AML solutions wherein the program is installed in a hosted center and acts like a premise-based AML solution for the client. However, it’s also possible for a midsized bank’s compliance team to use a true SaaS option, one that requires no installation and can be easily accessed through the web.

Here are some of the benefits that mid-sized banks stand to gain by subscribing to AMLaaS solutions:

Ease of Deployment and Immediate Use

Subscribing to a true SaaS AML solution allows a midsized bank to immediately use the services that it signed up for. There’s no need to install programs to its on-site or off-site devices, as the compliance team only needs to access the AML solution through the web. As soon as the bank’s subscription to the AMLaaS program comes into effect and as soon as the compliance team members have familiarized themselves with the functionalities provided by the AML solution, they can use the program to its full extent. In case the team members run into any issues, they can immediately depend on their provider for technical assistance and troubleshooting, as these services are bundled with their subscription. As such, there’s little need for the bank to hire additional manpower to tackle technical issues that are specific to its AML technology.

Improved Scalability

Midsized banks that are subscribed to AMLaaS solutions no longer need to rely on purchasing new programs and devices so that they can scale up or scale down their operations. They no longer have to invest in new hardware or software should their operations grow, as they have the option to simply upgrade or downgrade their AMLaaS solution subscription through their provider. If ever the number of cases they handle fluctuates within a short period of time, mid-sized banks can adjust their subscription package and control the cost of their compliance team according to the level of demand. This solution can serve as an effective buffer against changing customer numbers, regulatory requirements, and the rising cost of compliance.

Frequent Updates

Banks that own their AML solutions have to deal with updates in compliance requirements all on their own. This is not the case for mid-sized banks that use the services of AMLaaS providers. The providers are in charge of upgrading the solutions they offer so that the program adheres to the latest guidelines set by regulatory bodies. The cost of developing these upgrades can be distributed to their subscribers. As such, there’s no need for a single mid-sized bank to shoulder all the cost of upgrading its AML solution. Once the AMLaaS provider has prepared the necessary upgrades, they can make these improvements available on their software and readily accessible to their subscribers. Banks that use this service, then, don’t have to worry about being left behind in terms of technology. They can continue with their day-to-day affairs knowing that their AML solution is just as effective as that of their contemporaries.

A Cost-Effective Option for Midsized Banks

AMLaaS solutions offer mid-sized banks the opportunity to keep up with compliance requirements while minimizing the cost of doing so. Banks that are keen on reducing their compliance costs while effectively protecting their establishment from financial crime should consider using this type of service for their AML team.

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