woman working at computer

Examining institutions’ key needs in a BSA/AML lookback report

Historically, financial institution leaders tend to experience certain emotions when their institution needs a BSA/AML lookback conducted. Concern, for sure. Anxiety is another common one. Frustration too. The list goes on. These reactions are understandable, as BSA/AML lookbacks can involve unwanted elements: regulatory scrutiny, reputational damage and financial penalties. 

In the face of these stressful situations, institutions often look to enlist an experienced team of BSA and AML specialists that they can count on to conduct a thorough and independent assessment. Frequently, an institution prefers a third party that can bring a fresh perspective and the desired level of objectivity to the lookback process. 

More specifically, any institution that requires a BSA/AML lookback typically needs to find a firm that checks certain critical boxes when it comes to its team, its methodology and its use of leading-edge

What is a lookback? 

A Bank Secrecy Act (BSA) and anti-money laundering (AML) lookback primarily aims to uncover past suspicious activity and identify any flaws within a financial institution's monitoring systems. It can originate from the institution itself, or it may be ordered by a regulatory agency.  

A lookback involves reviewing historical transactions and customer data to detect any irregularities or potential activities. Such reviews are crucial for maintaining the integrity of financial systems and preventing illicit financial flows. 

When faced with an impending BSA/AML investigation or regulatory enforcement action, financial institutions can benefit in many ways from a firm that: 

  • Develops and executes procedures and processes for maintaining compliance with BSA/AML regulations, including transaction monitoring systems and training programs  
  • Executes targeted audit procedures focused on the identification of potential risks and reportable transactions  
  • Remediates enforcement actions and consent orders  
  • Performs lookbacks on transaction activity  
  • Evaluates the appropriateness of the BSA/AML policies and procedures  
  • Verifies the consistency of documentation and reporting with regulatory requirements  
  • Performs BSA/AML model validations to evaluate the integrity and efficiency of the model and the effectiveness of identifying risks in a timely and complete manner  
  • Optimizes transaction monitoring system rules and parameters  
  • Provides risk-based and job-specific training  

When it’s time for a BSA/AML lookback, institutions need to work with an integrated team of financial crimes and regulatory compliance specialists who have in-depth experience serving similar institutions.  BSA/AML related projects will be conducted using professionals with the following relevant certifications: 

  • Certified Anti-Money Laundering Specialist (CAMS)  
  • Certified Fraud Examiner (CFE)  
  • Certified in Financial Forensics (CFF)  
  • Certified Public Accountant (CPA)  

When conducting a BSA/AML lookback, it's crucial to engage a firm that employs a structured yet flexible methodology. A general approach typically involves a technology-driven strategy to mitigate unexpected outcomes. The process is commonly segmented into four distinct phases: 

Phase 1: Configuration – This initial phase involves close collaboration with the client to gather transaction data and other pertinent information for the transaction monitoring system. It also includes the customization of rules to align with the client's specific risk profile. 

Phase 2: Data ingestion – Following configuration, this phase entails the assimilation of all relevant data into the system and the execution of alert scenarios. It includes an assessment of the volume of alerts for unusual activities and an updated projection of the time required to complete the preliminary alert examination. 

Phase 3: Alert review – In this phase, alerts are reviewed, often grouped by customer to provide a comprehensive view of any unusual activities. Documentation of alert resolutions includes detailed justifications for either closing the alert or escalating it, thereby creating a thorough audit trail. 

Phase 4: Case review – This final phase involves a detailed investigation of all cases arising from the alert review to decide whether filing a Suspicious Activity Report (SAR) is warranted. Each case is thoroughly documented, ensuring a clear audit trail. Regular status reports are provided, detailing the number of cases examined, their current status, and the average time taken for investigation. Upon completion, a detailed report is furnished, encapsulating the methodology and findings of the lookback. 

While an experienced team and a proven methodology are critical components to a BSA/AML lookback engagement, technology is the engine that drives key factors such as efficiency, accuracy and scalability.  

With this in mind, we recommend focusing on using transaction monitoring systems to leverage a technology-led approach for each BSA/AML engagement with capabilities such as:  

  • BSA/AML transaction monitoring rules library that identifies high-risk transactions – customized to each institution’s risk profile  
  • Ability to build a bespoke transaction monitoring system that allows the engagement team to better identify red flags for potential money laundering with deeper insight 
  • Extensive rule library of AML industry risk typologies with the ability to fine-tune rules and thresholds based on each institution’s risk profile and create unique rules from scratch with no code required  
  • Out-of-the-box configuration to quickly load transaction and customer data safely and securely  
  • Grouping of alerts and cases to enable more wholistic and efficient investigation  

The backbone of BSA/AML methodology is technology, project management and communication. A thorough and efficient investigation will allow organizations like yours to meet deadlines as well as achieve the results expected.  

Where to go from here? 

The unfortunate reality with BSA/AML lookbacks is that institutions have minimal control over the process. The engagements often result from a problem in the control environment identified internally or externally by regulators or auditors and carried out, generally, by independent third parties. The institution’s control of the process is normally limited to choosing the right firm with the best combination of experience, methodology and technology.  

The other unfortunate reality is that financial crime is on the rise. In turn, there is more and more scrutiny every year from a regulatory standpoint. As a result, BSA/AML lookbacks are coming up more frequently – and are more important than ever before. 

If your institution needs a BSA/AML lookback, make sure you find a firm that specializes in BSA/AML investigations with professionals who have their CAMS certifications. And needless to say, you need a firm that takes a technology-driven approach. 

Baker Tilly has made a major commitment to BSA/AML projects, providing services to financial institutions such as lookback analyses, independent testing, validation of AML models, regulatory exam remediation and program development. Our approach to BSA/AML lookbacks will efficiently and effectively identify suspicious activity and provide recommendations for enhancing your transaction monitoring processes going forward. 

To learn more about how we can assist with BSA/AML lookbacks and other financial crimes solutions, talk with us. 

Ashley Farrell
wind and solar energy - IRA domestic content requirements
Next up

IRS simplifies IRA domestic content requirements for renewable energy projects