For many compliance teams, the idea of building an Anti-Money Laundering (AML) solution in-house seems like an appealing prospect. It offers full control over functionality, customisation to fit specific business needs, and the potential to reduce long-term costs.
But the reality of developing a system from scratch brings a heavy set of demands that stretch well beyond just coding a solution. Success depends on the right mix of skills, time, and commitment – none of which are easy to balance alongside day-to-day compliance obligations.
Enlisting the right people
AML isn’t just a technology problem; it’s a people problem. Getting an in-house system off the ground demands expertise from multiple domains, each with its own set of priorities and challenges. A strong team needs software engineers who can build and maintain a scalable system, and compliance professionals who know the regulatory landscape inside out.
Then there’s the matter of bridging the gap between these disciplines. A developer might build a system that works technically but fails to meet regulatory expectations. Compliance professionals might understand what the system needs to achieve but struggle to communicate it in technical terms. Without the right mix of expertise, gaps emerge – and in compliance, gaps can quickly turn into regulatory breaches.
Balancing AML compliance with technical development
A common pitfall when developing an in-house solution is underestimating the ongoing compliance workload. AML teams already have their hands full keeping up with regulatory changes, conducting investigations, and responding to audits. Adding a large-scale tech build to that list can stretch resources dangerously thin.
Even with the best developers on board, compliance teams need to be actively involved in shaping the system. The risk comes when the solution is built in a way that doesn’t align with regulatory expectations or industry best practices. If compliance leaders aren’t deeply embedded in the development process, the result could be a system that works in theory but fails under scrutiny from regulators.
The challenge of data quality and integration
AML solutions rely on vast amounts of data, but getting that data into a usable state is one of the biggest technical hurdles. Many organisations still deal with fragmented systems, legacy databases, and inconsistent record-keeping. Integrating all of this into a new AML solution is a critical task. Leading data suppliers offer high-quality data from various sources, such as sanctions lists, monitoring, and customer identity verification. However, the challenge lies in integrating these diverse, high-quality data streams into a cohesive and usable system.
While top-tier data suppliers provide valuable, reliable information, the process of merging different data sets, formats, and platforms can be complex. Each provider might use unique structures or protocols, making it difficult to seamlessly integrate and harmonise their data into one unified solution without the right expertise. Compatibility issues can slow down the process, and poor integration can lead to gaps in coverage or inefficiencies in detecting potential financial crimes.
Keeping up with regulatory change
Financial crime regulations are in constant flux, and an AML solution that works today may not be fit for purpose a year down the line. Any in-house system needs to be designed with adaptability in mind. But that’s easier said than done.
Regulators expect firms to react quickly to new guidance, sanctions lists, and reporting requirements. If an in-house solution lacks flexibility, compliance teams can find themselves stuck with a system that requires extensive re-engineering every time a rule changes. This slows down response times and increases the risk of non-compliance. External vendors often have the advantage of dedicated research teams tracking regulatory shifts, something that in-house teams may struggle to match.
The cost of building vs. buying
Cost is often cited as a reason to build in-house, but the true financial burden of an AML system extends far beyond the initial development phase. Software needs ongoing maintenance, security updates, and enhancements. Skilled staff need to be retained to manage the system, and compliance teams need to dedicate time to testing and refining it.
When comparing costs, it’s important to factor in the risks associated with system failures. A third-party provider carries liability for ensuring their solution meets industry standards, but when a firm builds its own system, the responsibility sits entirely on its shoulders. A compliance failure linked to an in-house system can lead to heavy fines and reputational damage, often outweighing any initial savings.
Managing expectations and avoiding burnout
Developing an AML system isn’t a one-off project – it’s an ongoing commitment. If expectations aren’t managed correctly, teams can quickly find themselves overwhelmed. Compliance staff who were initially excited about the prospect of a bespoke solution may start feeling the pressure of juggling regulatory duties with software testing, feedback loops, and system refinements.
Burnout is a real risk when compliance professionals are asked to step outside their core responsibilities for prolonged periods. If the project timeline keeps stretching while regulatory pressures mount, teams can end up in a worse position than they started, struggling to keep up with both their existing workload and a half-built system.
The reality check: Is in-house the right choice?
Building an AML solution internally comes with a high degree of responsibility. The right decision depends on whether an organisation has the internal expertise, capacity, and long-term commitment to make it work.
For firms with the right resources, an in-house system can offer greater control and precision.
But for many, the challenges outweigh the benefits, and the smarter choice may be to invest in a proven third-party solution that allows compliance teams to focus on what they do best – fighting financial crime.
