During my 28 years as a federal agent the use of link analysis software was integral in solving complex money laundering and terrorist financing investigations. Money launderers and terrorist networks are becoming evermore sophisticated in the way they layer their transactions. The use of link analysis is one of the best ways to be able to visualize the connections between entitles, the flow of the funds, and to explain these to senior compliance officials and regulators.
It was a surprising to me when I began consulting in the private sector that the use of link analysis was not readily utilized in AML investigations. I understand that that there are many reasons for this, namely time and expense. I would argue that use of link analysis software actually saves investigators time by allowing them to visualize the hidden relationships between seemingly disparate entities, and helps investigators to “follow the money” by visualizing money flows. Regulators are now requiring financial institutions go beyond the normal AML investigative protocols and look for and report on unusual patterns of activity between seemingly unrelated accounts that have no apparent economic purpose. Link analysis is one of the most efficient and effective ways to uncover these increasingly complex transactions.
Link analysis also allows investigators to more easily explain these anomalous transactions to senior AML officials and regulators alike. This is important for senior AML compliance officials so that they can better make decisions on whether to exit or retain the customer relationship. Link analysis also serves to demonstrate to regulators that the institution has the ability to investigate and evaluate complex money laundering transactions, and that it has a robust AML program. This may help to avoid regulatory oversight, potentially large fines and reputational risk.
In sum, link analysis is a powerful tool for AML investigators in that it: