Attend any financial crimes compliance conference in the United States, and you’ll invariably step into a conversation about suspicious activity reporting and the need for more feedback. Financial institutions file reports and rarely hear back from FinCEN or law enforcement about whether they helped. But there’s another feedback loop that can break down inside institutions: the one between compliance and business teams. These teams may see different data and face competing priorities, making it harder to translate what they know about customer risk into timely decisions and effective controls.

It’s a tension we know well at SentiLink, where stopping fraud and other illicit financial activity is as much about identifying good customers as it is about alerting our partners to signs of bad ones.

What recent enforcement actions show

In October, federal regulators fined two of the country’s largest financial institutions more than $1.5 billion combined over anti-money laundering and sanctions compliance failures, citing weaknesses in risk assessments and breakdowns in suspicious activity monitoring and reporting, among other deficiencies. Those actions are a reminder that while the feedback loop between government and financial institutions needs improvement – something Treasury itself has acknowledged – banks and those of us who support them also have work to do in turning what we learn into action. Leadership at both financial institutions acknowledged as much.

The harder work happens on the ground, where compliance and business teams must decide how to handle individual cases, and how those decisions should inform their future work. The regulatory findings illustrate where that process can break down. Information about customer risk was coming in, but not consistently translating into updated risk profiles or more effective monitoring. Gaps in customer due diligence also made it harder to assign the right risk ratings. Neither problem is unique to these two institutions, and neither is necessarily about missing data. The challenge is acting quickly on warning signs, then learning from them to build a stronger foundation for growth.

Compliance needs the business, too.

Most of the industry’s attention goes to one side of this — that business lines must take compliance seriously — and that’s true. But the other side gets less attention: Compliance teams benefit from taking the business seriously as well.

The business knows the customer, and that context is vital to discerning true red flags from unusual but innocuous circumstances. When the two views meet, the disagreement becomes productive. What each side learns then feeds into future reviews and model updates, creating a virtuous cycle.

Closing the loop

At SentiLink, we assess identity-related risks, help prevent fraud and other illicit financial activity, and verify more legitimate customers for financial institutions and other organizations. Our partners’ risk teams want us to catch more; their growth teams want us to approve more.

Both are right. A model that catches more fraud and other illicit financial activity by turning away good customers isn’t better. So we continuously improve our models with new information from our partners, new risk signals, and new data sources. We even name our models after legitimate customers our model updates helped approve – a reminder of the people behind these decisions.

Better feedback from the government and better tools from technology providers help. But the feedback loop institutions control most directly is their own: what compliance learns from its investigations, what the business knows about its customers, and whether the two come together in time to change a decision. Done right, that tension doesn’t slow institutions down. It makes both sides better at their jobs.