Boss Lady

Understanding AMLaaS and why you should insist your bank uses it


There can be little doubt about the impact of the COVID-19 outbreak on almost every facet of society. The chaos and uncertainty wrought by the global pandemic sent many of us scrambling for solutions to how we were going to purchase what we needed, stay in touch with our loved ones, and remain productive at our places of work. And it also sparked the need for a new fraud protection tool, known as AMLaaS. Why? Let’s dive in…

The pandemic had an especially profound effect on the banking industry and its ability to comply with national and international anti money laundering (AML) laws. Unable to report to their usual workspaces, bank compliance teams turned to their bank’s technology partners for a viable solution, giving rise to the newly minted service known as AMLaaS. Ironically, this newfound service offering could be just the thing to ensure banks remain relevant in the digital age.

If you’re looking to learn more about AMLaaS, then you’ve come to the right place. Here is a briefer on it, and the best arguments for why your bank should get involved in it.

What Is AMLaaS?

Anti Money Laundering as a Service (AMLaaS) is a service that banks offer other banks and financial institutions. For a fee, a bank equipped with a cloud-based anti money laundering software allows their customers, who are other banks, to access their cloud-based anti money laundering software platform, usually developed by a third party technology provider. Simply put, banks can run their own anti money laundering transactions through another bank’s software, without having to go to the trouble of upgrading their own systems. The end result: clients get the protection from money laundering that they need, and remain compliant with global anti money laundering regulations, while AMLaaS service providers create a valuable revenue stream using an underutilized asset.

At the start of the pandemic, AMLaaS was a useful way for banks to make use of their anti money laundering software, which were often underutilized at the time. Now, AMLaaS has become an important revenue stream for many banks who were able to transition to more modern platforms. Taking advantage of AMLaaS also put these companies ahead of competitors who were shackled to legacy systems and who, because of the pandemic, could not initiate an organization-wide digital transformation at the time.

 Why Does My Bank Need It?

Everyone Else Is Doing It

 Because most modern cloud-based AML systems are easy to implement and rely on a browser-based interface, AMLaaS has become one of the more popular ways for banks to transition into the digital age. As a result, acceptance of this technology has been fairly widespread, and industry experts expect that trend to continue into the future. According to a study by research firm Celent, as early as 2019, an estimated 50 percent of all AML transactions were executed off banks premises via a cloud-based, software-as-a-service (SaaS) platform. The arrival of the global pandemic only inflated these numbers even further.

 It’s a Way to Stay Relevant

 The global pandemic had several effects on the banking industry. One of these was to further the divide between those who had fully embraced the digital revolution and those who had not. The banks who have fully embraced open API principles have taken a position to be the backend support of client-facing financial technology companies. They are set to provide banking-as-a-service support to them, while also allowing less tech-forward companies to make use of their AMLaaS offerings on the side. This agile package sets them up to remain relevant in a financial industry landscape that is changing all the time.

Meanwhile, banks who insist on tying their operations to their legacy IT infrastructure just continue to dig themselves into even deeper holes. Potentially valuable customer information remains locked behind company silos, resulting in lost revenue that could have been used to fund modernization efforts. Worse, the legacy software’s developers may eventually decide to decommission the system. Without further support and updates, it’s only a matter of time before a more traditional bank’s entire system becomes truly compromised.

It’s a Potential Revenue Stream that Could Be Close to Effortless

 Given that much of the capital needed to offer AMLaaS has already been expensed, offering it as a true service to other banks is just good business sense. This allows banks to defray some of the cost associated with the upgrade to its own tech stack, eventually turning that initial investment into a revenue stream. Some additional investments may be necessary to make AMLaaS viable as a medium- or long-term service; for example, additional staff may be required to manage accounts and relationships. These should be relatively minor concerns compared to the potential that this service provides. In this way, banks move away from their traditional role as a trader in investment products and instead become rent-takers and landlords.

This era of open banking and shared APIs is definitely not for the faint of heart. Indeed, the agility necessary to remain viable in this time is not a trait that most banks have embraced. However, to keep their place in the finance industry, banks will need to adjust to their surroundings and leverage what assets they can. Otherwise, they run the risk of going the way of the dinosaurs.

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