Strengthening Anti-Money-Laundering (AML) Systems through Information Systems Auditing: Evaluating Data Integrity, Transaction Reporting, and System Controls

Posted: Jul 15, 2024

• Hamza Shahbaz Ahmad
  University of Missouri Kansas City
• Usman Sheikh
  Institute of Business Administration (IBA)
• Rabia Qureshi
  COMSATS University Islamabad

Abstract

This research examines how Information Systems auditing strengthens Anti-Money-Laundering (AML) systems through comprehensive evaluation of data integrity, transaction reporting mechanisms, and system controls in financial institutions. Through empirical analysis of 189 financial institutions across multiple jurisdictions from 2021 to 2024, this study develops a systematic framework for assessing AML system effectiveness through specialized IS audit methodologies. The research introduces a novel AML System Integrity Score (ASIS) that quantifies control effectiveness across data quality, transaction monitoring, and regulatory reporting dimensions. Empirical results demonstrate that institutions implementing comprehensive IS audit programs for AML systems achieve 67% higher detection rates for suspicious activities and 54% improvement in regulatory reporting accuracy compared to those with limited audit coverage. The study reveals that data integrity issues account for 42% of AML system failures, while inadequate transaction monitoring controls represent the most significant compliance risk. Findings indicate that effective AML system auditing requires specialized technical expertise,