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Adrian Isaac3 Oct 23

Build vs Buy for AML Software

In the world of financial crime prevention, the stakes are high, and the need for robust solutions is paramount. One crucial decision that financial institutions and organisations face is whether to build in-house or buy from a third-party vendor. This decision can have far-reaching implications, including cost considerations, functionality, scalability, and long-term sustainability. 
In this episode of Jade ThirdEye’s Spotlight on AML podcast, Jess Cath joins us to talk about the challenges many financial institutions face when considering whether to build or buy their own AML solution.
Jess Cath is Head of Financial Crime at Thistle Initiatives — a regulatory compliance consultancy who work with a wide range of firms across payments, cryptocurrency, wealth management, credit lending and traditional banking. Jess and her team encounter a diverse range of financial crime challenges, and as part of this they work with firms to build and transform financial crime frameworks, including looking at whether they should buy software or try and build solutions in-house.

You can listen now on Spotify, Apple Podcasts, or Podbean, or read the key takeaways from the interview below.

The Cost Factor: A Hidden Challenge

One of the common pitfalls encountered by organisations that choose to build their own AML solution is underestimating the long-term costs. Many organisations believe that building an in-house solution is more cost-effective in the short run. This perspective often overlooks the fact that software costs also occur after implementation. Ongoing maintenance and development of the system can become expensive, especially as the organisation's needs evolve, if there are issues or minor adjustments are needed. Additionally, the cost of hiring and retaining a skilled development team can add to the financial burden.

The advantages of buying

Buying an AML solution from a vendor can offer several advantages. Jess highlights the following key benefits:

  • Speed and efficiency: Vendor solutions are typically ready to implement more quickly than an in-house system. Vendors have already designed their products based on the latest industry best practices and guidance.
  • Functionality: Vendor solutions often come with a wide range of functionalities, which are continuously updated and improved.
  • Customisation: While vendors provide off-the-shelf solutions, they are increasingly open to customisation to meet specific client needs, fostering a true partnership model.
  • Knowledge and expertise: Vendors bring a wealth of knowledge, skills, and experience to the table, as their products have been tested across various client bases. This expertise can be invaluable in identifying and addressing financial crime risks effectively.

The advantages of building in-house

However, there are scenarios where building an in-house system may be the preferred choice:

  • Deep understanding: Your internal team may have an intimate understanding of your organisation's unique business processes, risks, and limitations.
  • Customisability: In some cases, vendor solutions may not be flexible enough to accommodate complex technical infrastructures or meet specific risk mitigation requirements.
  • Cost considerations: Depending on your organisation's size and needs, an in-house system may offer more cost-effective long-term solutions, especially when you can leverage existing resources.

Current trends in the landscape

The AML solution landscape is evolving rapidly. Organisations are increasingly seeking holistic solutions that can orchestrate various tools within their financial crime control frameworks. This trend reflects the desire for seamless integration and efficient management of disparate components.

Furthermore, many vendors are shifting towards partnership models, aiming to provide ongoing support and development after clients have purchased their solutions. This "buy and build" approach acknowledges that financial crime prevention is not a one-size-fits-all endeavour, and vendor-client collaboration is essential for addressing unique challenges effectively.

The decision to build or buy an AML solution is complex and requires careful consideration of an organisation's unique needs, resources, and long-term goals. It's crucial to recognise the hidden costs associated with building in-house and the advantages vendors can bring to the table in terms of expertise, functionality, and efficiency.

Ultimately, as the financial crime prevention landscape continues to evolve, organisations must strike a balance between building internal capabilities and leveraging the strengths of trusted vendors. Seeking external advice, establishing effective governance structures, and conducting thorough requirements gathering are essential steps in navigating this challenging decision-making process. Financial institutions and organisations must approach this decision with a clear understanding of their present needs and future aspirations to build a resilient and sustainable defence against financial crime.

You can listen to the full episode with Jess and Adrian below, or find our Jade ThirdEye podcast on Spotify, Apple Podcasts and Podbean.



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