Correspondent-based AML
Correspondent-based AML monitors correspondent banking relationships where banks provide services to foreign counterparties, addressing limited visibility into ultimate customers, fragmented transaction data, and difficulty performing KYC on foreign parties. This use case enables holistic views of correspondent networks, reconstructs transaction links, analyzes cash flows and ownership structures, heals incomplete transaction data, and reduces false positives while identifying genuine money laundering risks in correspondent relationships.
The Challenge¶
Financial institutions face significant challenges in correspondent banking AML:
- Limited visibility — Banks have limited information about the ultimate customers in correspondent transactions
- Fragmented data — Transaction data is fragmented across multiple systems with poor data quality
- KYC complexity — Performing KYC on foreign counterparties is difficult, leading to many false positives
- Multiple versions of truth — Inconsistent data across systems makes it hard to understand transaction context
- Network complexity — Correspondent relationships involve complex networks of banks, customers, and transactions
- Regulatory scrutiny — Correspondent banking is under intense regulatory scrutiny for AML compliance
- Focus limitations — Traditional systems focus on "lower hanging fruit" (internal clients) rather than the full spectrum of risks
- Missing connections — Clients are treated separately, missing connections that indicate genuine issues
As a result of fragmented and poor data quality, existing AML platforms struggle to properly monitor and understand the context of correspondent banking. KYC of the foreign party in a correspondent banking transaction is very hard to achieve, leading to large numbers of false flags and inaccurate mapping via-vis the organization's own metadata. In addition, potential genuine issues are missed as clients are treated separately as opposed to combining them into one entity.
Why EKG is Required¶
Enterprise Knowledge Graphs enable a holistic view of correspondent banking:
- Holistic view construction — Knowledge Graph technologies enable a holistic view to be constructed and can handle these multiple versions of the truth
- Network reconstruction — Reconstruct links and networks to analyze historic and current transactions
- Cash flow analysis — Link into existing networks to understand the cash flows of foreign counterparties, nature of the business, and context in terms of ownership structures
- Data healing — Use all data related to the entity (both internal and external) to heal or reconstitute the message, completing any missing data-points for subsequent and historic transactions
- Contextual monitoring — Understand the full context of correspondent relationships and transactions
- Pattern detection — Identify suspicious patterns across correspondent banking networks
This allows you to use all data related to the entity (both internal and external) to heal or reconstitute the message, completing any missing data-points for subsequent and historic transactions. For this point alerts can be raised and suspicious transactions investigated.
Business Value¶
- Enhanced risk detection — Identify genuine money laundering risks in correspondent banking relationships
- Reduced false positives — Better context reduces false flags and inaccurate mappings
- Regulatory compliance — Meet enhanced due diligence requirements for correspondent banking
- Operational efficiency — Focus resources on genuine risks rather than false positives
- Network insights — Understand the full network of correspondent relationships and transactions
- Data quality improvement — Heal and complete transaction data for better analysis