U.S. Bank Penalty Highlights Struggle with High False Positives for Staffing
One aspect of bank anti-money laundering obligations is monitoring transactions and applying a risk-based approach to finding potentially suspicious activity and investigating. Legacy software struggles with high false positives, with rates typically hitting 95-99%. Such high false positive rates waste substantial investigative resources and can undermine the “culture of compliance” financial services firms strive to create.
U.S. Bank is alleged to have responded to its insufficient investigative capacity by capping the number of alerts that its transaction monitoring software would generate. This limited the number of investigations to a predetermined number without considering the legitimate and dangerous cases that would be lost below the cap.
“U.S. Bank chose to manipulate their software to cap the number of suspicious activity alerts rather than to increase capacity to comply with anti-money laundering laws,” said FinCEN Director Kenneth A. Blanco.
These failures led to thousands of transactions and millions of dollars not being investigated or reported.
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