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No bank, anywhere in the world, has the budget to pay their Level One (L1) FinCrime compliance analysts six-figure salaries. Yet, for many smaller BFS firms, the reality is that a higher paid officer must often step in to perform the L1 analyst function to alleviate crisis-level staffing shortages.
How prevalent is the problem? According to a recent study by WorkFusion and Celent, the leading research and advisory firm focused on technology for financial institutions, Technology Transformation in Financial Crime Compliance, “38% of firms fill capacity gaps by calling on more senior personnel to pitch in. Smaller organizations are more likely to call on their compliance officers to help out – 44% of organizations with assets under US$50 billion rely on senior personnel to close gaps. This clearly impacts the time these senior personnel can spend on higher value activities.”
The impact on higher-value activities performed by senior personnel is tangible. After all, often a smaller bank’s OFAC officer or Head of Compliance must perform L1 work. Such was the case with this U.S.-based bank that deployed an artificial intelligence-based solution to alleviate L1 staffing challenges. Prior to deploying AI, the bank’s OFAC officer had been spending much of his time reviewing L1 alerts around real-time payments compliance. This is simply unacceptable to a bank’s executive team when they consider the strategic priorities of an OFAC officer.
The litany of strategic activities an OFAC officer must forego when spending time on L1 work is staggering. Here’s a sample list which, as you can see, is quite long:
- Meet with regulatory authorities as warranted.
- Lead investigations and/or due diligence reviews where OFAC issues are present, such as in connection with relevant customer on-boarding or wire transactions.
- Assist the Chief Compliance Officer in providing responses to audit findings and examination for OFAC related matters and other regulatory matters.
- Manage responses to subpoenas or other document requests from law enforcement or regulatory agencies as they relate to OFAC.
- Monitor OFAC website for updates and create and disseminate OFAC bulletins to the firm’s business lines and ensure appropriate compliance response to any changes to OFAC requirements or new sanctioned parties.
- Prepare annual OFAC Risk Assessment for management review.
- Perform periodic review of business OFAC procedures for compliance with OFAC regulations; ensure policies and procedures are current and followed.
- Manage staff in day-to-day operation of OFAC responsibilities, particularly related to Settlements unit personnel with OFAC responsibilities.
- Develop, implement, and monitor OFAC training to appropriate personnel.
- Handle OFAC issues arising from the AML transaction monitoring system.
- Maintain the bank’s OFAC Policies and Procedures.
- Perform Section 314(a) Information Sharing
- Update OFAC Lists to ensure appropriate dissemination and testing of the bank’s systems.
- Keep abreast of OFAC related regulations and inform the Compliance Department accordingly.
- Prepare reports to OFAC regarding blocked/rejected transactions.
- Develop categories of appropriate Management Information regarding the OFAC program and ensure completion of same for Senior Compliance and Business Management.
- Raise or escalate all serious OFAC compliance issues to the Chief Compliance Officer.
- Assist in the preparation and testing of updates to systems for the Compliance functionality.
The bank officer who participated in the case study, summed up how bank officers end up performing L1 compliance work: “The only immediate solution I could find [to L1 staff shortages] was to perform the L1 analyst work myself. Smaller banks like ours struggle to attract qualified L1 analysts who can hit the ground running, and our need was immediate.”
The OFAC officer was able to manage the L1 alerts on his own, but he knew that was not a feasible long-term solution. Yet, as the study found, “staff shortages and employee retention are perennial issues that create an unvirtuous cycle, leading to delays in compliance processes and limiting the ability of compliance departments to support the business with 74% unhappy with their current staffing level.” So, if your firm is out there trying to attract L1 compliance analysts, recognize that there’s a lot of competition to hire them. The biggest banks with the most attractive employment packages typically win the day when competing for staff.
AI-driven Digital Workers solve the compliance staffing problem
As the case study demonstrates, organizations are using automation to increase efficiency and productivity, freeing up capacity to support risk and the business. And now that solutions exist that combine AI-driven automation with human-in-the-loop features to ensure maximum accuracy, BFS firms have the ideal means to end the days of the six-figure-salaried L1 analysts.
“Leveraging AI-enabled automation technology to enhance efficiency and productivity can help alleviate capacity shortfalls in financial crime operations,” said Neil Katkov, PhD, Director – Risk at Celent. “And as technology drives improvements in productivity, compliance departments can better support strategies to manage risk and add value.”
It’s little wonder the Celent study found that 86% of banks will increase their spending on AI/machine learning over the next two years.
Banks can start small and get some quick wins with pre-built AI Digital Workers that come out of the box fully trained in L1 work like sanctions screening alert review, adverse media monitoring, transaction screening and transaction monitoring alert review.
If your team is thinking, “we only have a short time to get results,” the good news is that AI Digital Workers typically demonstrate 3-5X ROI, breaking even in the first three to six months and deliver true value even faster.
Simply put, AI Digital Workers are good for the bottom line, enabling organizations to prove AI success with minimal risk.
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