Question

Case Study

Client’s challenge: Leading financial institution

• Creating and implementing a global Anti-Money Laundering (AML) risk score for liability clients

• Harmonizing AML risk scoring standards across business units and regions

• Analyzing and risk scoring tens of millions of liability accounts

A leading financial institution needs to develop a globally consistent Anti-Money Laundering (AML) risk model to comply with a consent order from a banking regulator. Time is of the essence not only because of a tight deadline imposed by the regulator but also because of the scale of the project: the solution needs to enable risk scoring for tens of millions of deposit account holders worldwide.

The financial institution’s previous AML risk models have been built around business units and regions. Each business unit uses its own qualitative methodology with some regional variations woven in to apply a set of rules to the customer data. Coming up with a single global solution will be a challenge. Simply gathering stakeholders in a room and having them hash out their differences isn’t likely to result in a consensus. The financial institution needs expert help to come up with a solution that would meet the requirements of the consent order within 13 short months. Failure to comply might result in fines, penalties, and other sanctions.

Question:

What is the business problem you are trying to solve? What's the first step you'll take? What is your approach to developing a Hypothesis? (Include your Hypothesis) What data would you collect? How would you analyze the data? How would you present the information to the client? What insights did you develop? What recommendations would you make?

Answer 1

Answering the first 4 sub-questions as per Chegg Guidelines:

The company under consideration is lacking a standardized AML risk model. Its different business units have different risk model, thereby generating the need of a global model for standardized action. The consultant is given the task to come up with a standardized global AML risk model which all its business units will be required to adopt.

The first step in this problem analysis will be to conduct a meeting with the primary stakeholders of business as well as that of the different business units. This meeting will be aimed at finding the problems and constraints with the existing decentralized risk model and the need and expectations from the centralized risk model.

The approach which the consultant may follow to develop a hypothesis for this problem:

· Define the problem under consideration

· Identify the constraints, facilitating factors, catalysts, etc. for the problem

· Develop the hypothesis for the research study

· Conduct the research study and analyse the results

· Implement the most suitable solution for the problem in hand

The hypothesis for the given case can be: Incorporating a standardized global AML risk model will enhance the business efficiency and effectiveness by 10% in one year.

The data which the consultant needs to take into consideration for this problem are as follows:

· Problems faced by individual business units in managing risks

· Problems faced by company as a whole in managing AML risks

· Benchmarking study to identify the industry’s best practices, followed in this regard