Developing a quality score methodology for financial reporting

Abstract

Money laundering is a huge problem that is faced by financial institutions and banks are mandated by the government to have strict policies and procedures towards anti-money laundering reporting. The outcome of a complex investigation process is a Suspicious Activity Report (SAR) which is used by Financial Crimes Enforcement Network (FINCEN) to trace back criminals and to curb the money laundering activities. This thesis work involves developing a quality rating methodology for SAR reporting at the bank and rates the critical elements in determining the quality of a SAR. The results of the quality scoring mechanism have been validated by using Multivariate tools and techniques. Mahalanobis- Taguchi Strategy (MTS) and Principal Component Analysis (PCA) were used to come up with the measurement scale to distinguish the good and bad SARs and PCA was used to list the critical elements that were listed by the MTS approach. The results of the analysis were presented towards the end of the thesis and this methodology can be used to determine the quality rating of SARs.