False positives have a terrible reputation among anti-money laundering (AML) circles. As mentioned in my previous article on ending the false positive alerts plague, approximately 90-95 percent of alerts generated by Transaction Monitoring Systems (TMS) are false positives. So, why don’t we tighten our rule thresholds to let fewer alerts through?
Unfortunately, tightening thresholds typically increases false negative alerts, which are real money laundering activities that the TMS didn’t catch. Though false positive alerts lead to high operational overhead, false negative alerts can cost you both in reputation and in major fines and penalties. As AML teams know, regulators have no qualms handing over hefty fines, which have risen considerably in the last decade.Read More