System Selection: Identifying Your Best Option

I. Introduction

As technology advances, the number of vendor-supplied products in any given area grows as well. AML compliance is no exception. There are more than 60 well known financial crime technology vendors that operate in any one of the following areas:

A. Transaction Monitoring

B. Case Management

C. Know Your Customer

D. Sanctions Screening

The number of available vendors presents a challenging issue to any institution looking to understand which system will be the most appropriate fit. I will examine some better practices related to system selection, as well as how to make the biggest impact in terms of efficiency and effectiveness during the system selection process.

II. System Selection

While technology continues to change, the principles of system selection remain more traditional. A methodical, traditional approach usually yields the best results, yet many institutions take an ad-hoc approach to selecting a system. One seemingly reasonable tactic is to begin evaluating various systems via demos to determine which system seems appropriate or offers the most appeal from a functionality or usability perspective. This strategy does not always provide the best outcome, since system evaluation begins midway through a traditional system selection process. So where to start? Generally speaking, an effective system selection process includes the steps depicted below each of which will be explored in detail:?

A. Develop Needs Assessment

A comprehensive needs assessment will identify why a new system is required, and begin to explore related concerns and options. This can include:

1. Existing system assessment.

2. Identification of deficiencies in your current system.

3. Initial inquiry into potentially suitable technologies.

4. Considerations around selecting a system that can serve multiple purposes, thereby delivering efficiencies and cost-saving opportunities.

5. Evaluation of ease of ongoing maintenance and support from vendors.

? A needs assessment will generate a clearer understanding of areas of opportunity for your institution. Therefore, actions taken leading up to vendor selection will be optimized and accurately mapped to your unique needs.? A needs assessment can also serve as the foundation of the business case for securing budget approval for a new system.

?B. Build Business Requirements

? Detailed business requirements are an essential component of the selection process and will also be used throughout implementation and deployment. Business requirements should be system-agnostic and capture the needs of the business, i.e., everything the business requires the system to do to enable it to be compliant, effective, and efficient. Additional key requirements and considerations can include:

1. IT-driven platform or cloud requirements and implementation expectations.

2. Critical non-functional needs, such as vendor management requirements.

3. Requirements derived from applicable company policies.

C. Construct and Distribute a Request for Proposal (RFP)

These detailed business requirements become the foundation of an RFP. It is important to have a good understanding of the solutions available on the market. This knowledge will aid in identifying RFP candidates that are likely to meet the needs of your organization, and thus enable you to distribute your RFP to the appropriate vendors for written responses.

?D. Score Vendor Responses

? Vendors’ RFP responses can then be scored to provide an unbiased, quantitative view into which vendor system best fits your business requirements. To facilitate this process, an organization would utilize a vendor evaluation framework and scoring methodology, similar to the one depicted in Figure 1 below.

This framework and methodology will consider the organization’s priorities, along with the criticality of the requirements outlined in the RFP, and account for those critical requirements when weighing each vendor’s response, as illustrated in Figure 2 below.

While functional fitness is of the highest importance in any RFP, other factors that may not be covered in the RFP include each vendor’s:

1. Quality of responses and interactions.

2. Stability of the vendors and product roadmap.

3. Dedication to meeting the organization’s needs[1].

?E. Finalize Vendor Selection

? Demos and compatibility evaluations can then be conducted with the vendors that scored highest. Additional information and conversations with each vendor will provide insight and clarity for the final vendor selection. During the vendor discussions, it will be imperative to examine the vendor’s account management process to evaluate the level of support your organization will receive after the sales process concludes. Account management is typically dependent on how important the organization is to the vendor. For example, if an organization is significantly smaller than the vendor’s other clients, the vendor’s dedicated time and resource allocation is usually smaller as well. These insights will emphasize the most significant qualities needed of a vendor, and therefore, call for additional high priority scores to calculate, as shown in the figure below.

With this, the the most compatible vendors become apparent and, therefore, easier to identify when compared to the previous step’s unweighted scores where all vendors seem to perform equally. Once an institution identifies which vendor is the most appropriate for them based on all criteria in the selection process, administrative measures—such as identifying the responsible internal parties, timeline, and procurement of necessary resources—can begin.

III. Other Considerations

Given that vendor contracts often span extended periods of time, selecting the incorrect system can cause years of pain. To avoid buyer’s remorse, the organization should challenge itself to be thorough and take an expansive view during the needs assessment process. In other words, instead of simply planning to replace one system in favor of another that operates in the same capacity, institutions should consider from the outset whether additional benefits would be gained from an alternative system. For example, the many similarities between fraud and AML monitoring systems mean that, depending on the institution, there could be an opportunity to combine AML and fraud capabilities at the system level. Systems that serve a dual purpose can introduce efficiencies into your ecosystem via:

A. Better identification of fraud and money laundering schemes that cross channels, products, and lines of business.

B. Improved compliance.

C. More targeted and actionable alerts and investigations.

D. Enterprise-wide understanding of fraud and money laundering risks.

E. A holistic view of potentially suspicious activity during the investigation process.

Another consideration could be contemplating technology that can supplement the vendor solution’s capabilities. For example, automation tools or machine learning models that create additional benefits for institutions may be part of the needs assessment and requirements.

These types of considerations, and others, cannot be evaluated adequately without first developing a comprehensive needs assessment and building a complete, actionable set of business requirements. When organizations understand what requirements need to be addressed at a detailed and documented level, they can successfully map their individual requirements to a potential solution.

IV. Conclusion

?The number of available vendors, particularly in the financial crimes space, presents a challenging issue to any institution looking to choose and implement a new system. While available solutions are developing at extraordinary rates and technology is constantly changing, the traditional process of selecting a vendor remains a steadfast approach. Understanding the current needs, deficiencies, and requirements of your organization creates a solid foundation for the vendor selection process. From there, the following steps, including drafting and distributing an RFP, and then scoring RFP responses, can be completed to determine the vendor that best meets the needs of the institution. This thorough vendor selection process can therefore lead organizations to a solution that effectively serves the institution for the foreseeable future.

[1] This is meant to be an evaluation of how important of a client you will be to the vendor.? This is explained in more detail in section II. E.