Adequate staffing for Anti-Money Laundering (AML) and sanctions compliance programs is a cornerstone of operational excellence and risk management. But many financial institutions continue to fall short until they are forced to confront them during a regulatory examination.

The stakes of non-compliance due to staffing inadequacy are high: Regulatory penalties, reputational damage, and more.

The good news is that staffing adequacy issues are solvable. And once addressed, adequate staffing ensures that alerts are reviewed promptly and thoroughly, investigations are conducted with precision, and regulatory requirements are met with confidence.

Here, we explore the key strategies financial institutions can use to ensure staffing adequacy for AML and sanctions compliance programs. By focusing on staffing adequacy, institutions can turn a potential weakness into a strength.

The Importance of Staffing Adequacy

AML and sanctions compliance programs are designed to protect the integrity of the financial system, detect and prevent criminal activity, and support global security initiatives. And a number of recent consent orders, including several in Q4 2024 alone, mention staff or staffing, reflecting this importance.

Consequences of Non-Compliance

Without the right number of people, equipped with the necessary expertise and tools, even the most sophisticated monitoring systems and policies can fall short. When staffing levels or skills are insufficient, critical tasks like transaction monitoring, suspicious activity investigations, and sanctions screening may be delayed or improperly executed, leaving the institution vulnerable to financial crime risks and regulatory findings.

While the consequences of noncompliance have traditionally been associated with regulatory penalties, the broader implications are just as significant. Institutions that fail to maintain adequate staffing levels risk reputational damage, loss of customer trust, and operational inefficiencies that translate into increased operating costs for the institution.

For example, a compliance program struggling with backlogs of unresolved alerts or improperly investigated cases may inadvertently allow illicit activities to go undetected, exposing the organization to fraud, money laundering, or sanctions violations. Or insufficient resources and staffing could lead to alert closures without proper justification (i.e., to avoid a backlog, an analyst mass-closes alerts).

Either way, both of those examples can lead to unnecessary costs and obstacles to a company’s expansion.

Regulation and Enforcement of Staffing Inadequacy

Agencies such as the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) have demonstrated heightened expectations for financial institutions to maintain robust AML and sanctions compliance programs.

Consent orders, matters requiring attention (MRAs), and matters requiring immediate attention (MRIAs) frequently cite staffing inadequacies as a root cause of broader compliance deficiencies. These enforcement actions often require institutions to conduct detailed reviews of their staffing levels, qualifications, and governance structures, underscoring the critical role of staffing in overall program effectiveness.

Reactive Approaches to Staffing Adequacy Are Often Insufficient

Despite the importance of staffing adequacy, many institutions only become aware of gaps in their compliance programs when regulators bring them to light. This reactive approach is common, as institutions may assume their existing teams and processes are sufficient until an examination reveals otherwise.

For example, regulatory examiners might question how a compliance team is managing thousands of alerts generated by a transaction monitoring system or whether the quality of alert reviews and investigations meets expectations. Such questions often expose underlying issues, such as insufficient staff to handle the workload, inadequate training, or suboptimal use of technology.

The Path to Staffing Adequacy

Board Must Understand Importance of Staffing Adequacy

The foundation of any successful Anti-Money Laundering (AML) and sanctions compliance program starts with the board of directors. The board’s role goes beyond simply approving policies: according to regulatory guidance, the board is ultimately responsible for the AML program.

This means that it must actively understand and champion staffing adequacy as a critical element of compliance success. Regulators hold boards accountable for the overall effectiveness of an institution’s compliance program, including whether sufficient resources are allocated to meet its risk profile.

One of the most important responsibilities of the board is to appoint an AML officer who runs the day-to-day program. To be successful, the board must ensure that the officer has the authority, budget, and staff necessary to carry out their duties. However, many boards fail to grasp the importance of staffing adequacy, often viewing compliance as a financial burden rather than a strategic investment.

AML Officers must report directly to the board to keep them apprised of the current state of the program and whether the institution’s staffing aligns with its risk exposure, including customer demographics, transaction volumes, product and service offerings, and geographic reach. Proactively addressing these issues allows the board to fulfill its oversight responsibilities and ensure the compliance program is not only effective but also adaptable and resilient in the face of future challenges.

System Optimization

Even with a properly staffed compliance team, inefficiencies in systems and processes can create unnecessary burdens that impede performance. One of the most common challenges is the over-generation of false positives by transaction monitoring systems, which can overwhelm analysts and lead to significant backlogs. Optimization focuses on fine-tuning monitoring rules and thresholds to better reflect the institution’s risk profile, reducing irrelevant alerts while ensuring that potentially suspicious activity is flagged for review.

Beyond system optimization, streamlining workflows and enhancing case management tools can significantly improve efficiency. For example, automated escalation protocols can ensure that complex cases are routed to senior investigators, while low-risk alerts are addressed more quickly. These changes help compliance teams focus their resources on high-value tasks, reducing both the time and effort required to meet regulatory obligations.

When institutions optimize their systems and processes, they alleviate pressure on their staff and enhance the overall effectiveness of their compliance program. It is not about replacing people with technology; it’s about empowering staff to work smarter, not harder, and ensuring that resources are used strategically.

Risk Assessment

Risk assessments evaluate the unique vulnerabilities of an institution, providing a clear understanding of its exposure to financial crime. By analyzing factors such as customer types, products and services offered, geographic exposure, and transaction patterns, organizations can identify areas of higher risk that require additional staffing or specialized expertise.

For instance, a bank with significant cross-border transactions in high-risk jurisdictions will need a larger and more experienced compliance team than a local bank serving a low-risk customer base. Risk assessments also help institutions ensure their compliance programs remain dynamic, evolving to meet new threats or changes in business operations.

As an example, the introduction of new products, such as virtual assets, or entry into new markets can significantly alter an institution’s risk profile. Regularly updating the risk assessment allows organizations to align their staffing and resources with emerging challenges, ensuring they remain proactive rather than reactive in their compliance efforts.

Outsourced Alert Reviews

Alert volumes can fluctuate due to system changes, seasonal variations in activity, or growth in the institution’s business. When in-house teams are overwhelmed, outsourcing can provide immediate relief, allowing organizations to maintain compliance while addressing capacity gaps. This approach is particularly valuable during periods of transition, such as mergers, acquisitions, or major system upgrades, when internal resources may be stretched thin.

By partnering with experienced third-party providers, institutions can ensure that alerts are reviewed promptly and thoroughly, avoiding backlogs and meeting regulatory deadlines. However, outsourcing requires careful oversight. Institutions remain responsible for the quality of outsourced work and must conduct due diligence to ensure that service providers meet regulatory standards.

When used strategically, outsourcing allows organizations to scale their compliance efforts without compromising quality or overburdening their teams, providing a valuable buffer during periods of high demand.

Training

Even the most robust staffing and technology infrastructure will fail without adequately trained personnel who understand their roles and responsibilities and how their role fits into the larger compliance operation. Training ensures that compliance staff are equipped to navigate complex regulatory requirements, identify suspicious activity, and use monitoring systems effectively. Importantly, training must be ongoing, reflecting the dynamic nature of financial crime risks and regulatory expectations.

Effective training programs should be tailored to the specific needs of different roles within the institution. For example, analysts need detailed guidance on reviewing alerts and recognizing suspicious patterns, while investigators require advanced training on case management and SAR filing. Senior management and board members also need training to understand their oversight responsibilities and the strategic importance of staffing adequacy and how it fits into the larger compliance operations.

Beyond technical skills, training should emphasize the importance of fostering a strong compliance culture, ensuring that employees at all levels understand their role in protecting the institution and the financial system from abuse.

Staffing Assessments

A robust staffing assessment evaluates internal capacity and capability. It examines factors such as expected workload, qualifications, and capacity planning to identify gaps that may hinder the effectiveness of the compliance program.

For example, if an institution’s monitoring system generates a high volume of alerts, a staffing assessment can determine whether the current team has the capacity to handle the workload efficiently. It can also identify skill gaps, such as a lack of certifications or experience among analysts, which may impact the quality of investigations.

By providing a clear picture of staffing needs, a staffing assessment allows organizations to make informed decisions about recruitment, training, or reallocation of resources.

Independent Testing

Independent testing provides an objective evaluation of the program’s effectiveness, helping institutions identify gaps before they become regulatory findings. Even internal audit is independent of the BSA function and can provide an objective evaluation.

Effective independent testing should examine all aspects of the compliance program, including the quality and timeliness of alert reviews, the adequacy of training programs, and the alignment of staffing levels with the institution’s risk profile. Engaging qualified independent testers that are knowledgeable in AML compliance program requirements and best practices is essential, as regulators often criticize institutions that rely on underqualified reviewers.

Adequacy of Monitoring Systems

An adequate monitoring system should generate actionable alerts that align with the institution’s risk profile, minimize false positives, and provide robust reporting capabilities to support regulatory exams.

Regular reviews and upgrades of the monitoring system are essential, particularly as the institution’s risk profile evolves. For example, a system designed for a small regional bank is likely inadequate for a growing institution with international operations.

By investing in advanced technology and ensuring that systems are optimized regularly, institutions can enhance the efficiency of their compliance teams, allowing them to focus on high-value tasks.

Addressing Staffing Challenges and Consent Orders with the Right Expertise

For financial institutions grappling with staffing deficiencies or consent orders, the path to resolution begins with selecting the right expert to address these challenges. The right expert can bring objectivity, regulatory insight, and technical expertise to assess gaps, optimize systems, and guide institutions through remediation.

Whether it’s conducting a thorough staffing assessment, providing outsourced alert review services to clear backlogs, or delivering targeted training to improve staff performance, expert assistance ensures that the institution meets regulatory expectations while laying the groundwork for long-term success.

Selecting the right expert requires careful consideration of their track record, regulatory knowledge, and the ability to provide practical, sustainable solutions. A strong partner will help the institution move beyond immediate remediation, building a compliance program that is efficient, scalable, and aligned with its strategic objectives.