Financial Crime Risk Management Systems: AML and Watchlist Monitoring 2019

Market update

The AML market landscape varies in its maturity and depth – while AML is well-established in western banks, for example, it is less mature in other geographies and industries. Within financial institutions (FIs), AML capabilities increasingly function on a continuum: centralized within specific compliance departments, but also present in other operational areas such as Know Your Customer (KYC) and customer lifecycle management (CLM).

In areas like retail banking where AML is relatively mature, FIs have reached an equilibrium. They are onboarding fewer suspicious customers, and growth in suspicious activity reports (SARs) – the primary AML indicator – has flattened. But these developments have come at the cost of large and hugely inefficient compliance departments, often containing thousands of employees.

FIs now want to reconfigure their existing AML processes to make them more efficient and valuable. But there has also been a shift toward understanding and quantifying AML solutions, rather than creating ever more complex tools and systems. This has sharpened the focus on model risk management and validation capabilities, to enable FIs to interrogate and authenticate existing models. Vendors and FIs are also considering new ways to express AML information, such as delivering it as a single headline figure (a ‘compliance score’ similar to a credit score).

As AML use matures in investment and retail banking, it is spreading into other areas, notably trade finance, gambling and the FinTech sector. Trade finance is an especially complex area for AML, with many constraints and a reliance on sometimes limited data that can vary across geographies.

Nevertheless, trade-based AML is having a significant business impact on FIs, and is a valuable potential market for new vendors.

Vendor landscape

Packaged solution vendors and data providers remain the backbone of the AML marketplace. But new entrants, such as commercial workflow and advanced analytics vendors, pose a threat, especially to packaged solution vendors. FIs, especially large and complex ones, are looking to establish core case management functionalities with additional components.

End-to-end solutions will increasingly be used by smaller firms with less complex data and customer requirements.

While the new players are unlikely to challenge incumbents in their core area of case management, they are increasingly likely to attack the ‘edges’ of their capabilities, in areas such as transaction monitoring, entity resolution and segmentation analytics.

Finally, as AML moves beyond its core compliance areas, solution vendors are having to consider ancillary sectors where it is relatively immature, such as trade finance, gambling and the burgeoning FinTech sector (with technology companies providing financial services). While these areas offer new opportunities, they also bring their own challenges and impacts for the vendor landscape, in addressing the wide range of firms and requirements they contain.

This report uses Chartis’ RiskTech Quadrant® to explain the structure of the market. The RiskTech Quadrant® employs a comprehensive methodology of in-depth independent research and a clear scoring system to explain which technology solutions meet an organization’s needs. The RiskTech Quadrant® does not simply describe one technology solution as the best risk management solution; it has a sophisticated ranking methodology to explain which solutions would be best for buyers, depending on their implementation strategies.

This report covers providers of AML/watchlist monitoring solutions: Accuity, ACI Worldwide, AML Partners, Arachnys, Ayasdi, BAE Systems, BlackSwan Technologies, Clari5 (by CustomerXPs), EastNets, Fenergo, FICO, FinScan, Fiserv, GBG, idetect, InfrasoftTech, Intellect Design, LexisNexis Risk Solutions, Manipal Group, NICE Actimize, Oracle, Pelican, RDC, Refinitiv, SAS, Silent Eight and Verafin.

We aim to provide as comprehensive a view of the vendor landscape as possible within the context of our research. Note, however, that not all vendors we approached responded to our requests for briefings, and some declined to participate in this research.