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Published on
June 24, 2025
Decision Tree
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Accelerate AML Compliance: Meet Regulatory Demands with 80% Less Setup Time
In AML compliance, a decision tree is a tool that uses a series of yes/no or if/then questions to help financial institutions assess risks related to transactions, customers, and alerts for suspicious activity. It provides a clear, structured process for deciding when further action, investigation, or reporting is needed.
This tool is used in various situations, including:
- Assessing risk during customer onboarding or transaction reviews.
- Deciding which alerts generated by automated systems need further investigation.
- Ensuring compliance with AML rules, guiding decisions on whether to file a Suspicious Activity Report (SAR) or take other necessary actions.
Example:
Scenario:
A bank (Firm X) gets an alert for a $15,000 cash deposit from a customer, Mr. Yahya, flagged by the bank's automated system as potentially suspicious. The bank uses a decision tree to decide whether to investigate further.
Here’s how the decision tree works:
- Does the customer have a clear source of funds?
Yes: Move to the next question.
No: Investigate further.
- Is the transaction amount higher than usual for this customer?
Yes: Move to the next question.
No: No investigation needed, dismiss alert.
- Is the customer’s behavior unusual based on their history?
Yes: Investigate further.
No: Move to the next question.
- Is the deposit linked to high-risk countries or individuals?
Yes: Investigate and file a Suspicious Activity Report (SAR).
No: Move to the next question.
- Does the transaction match common money laundering patterns?
Yes: File a SAR and investigate.
No: Dismiss alert, no further action needed.
In this case, since Mr. Yahya's deposit raises multiple red flags, the decision tree leads to a full investigation and filing a Suspicious Activity Report (SAR).
What Happens Next:
- The bank finds that Mr. Yahya is linked to a drug trafficking operation, and the SAR helps authorities track the illegal money.
- The decision tree helped the bank stay consistent in its decision-making, ensuring compliance and preventing money laundering.
Key Points:
- A decision tree helps AML teams decide whether to investigate or dismiss alerts based on clear, structured questions.
- It ensures consistency and compliance with regulations by guiding financial institutions in making the right decisions.
- The example shows how the decision tree helps banks properly assess alerts and take action like filing a Suspicious Activity Report (SAR).
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Decision Tree
Learn how AML decision trees guide banks through risk analysis, helping assess alerts, flag suspicious activity, and decide when to file SARs or investigate.
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Learn how AML decision trees guide banks through risk analysis, helping assess alerts, flag suspicious activity, and decide when to file SARs or investigate.
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Decision Tree
Learn how AML decision trees guide banks through risk analysis, helping assess alerts, flag suspicious activity, and decide when to file SARs or investigate.
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