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Transforming AML Efficiency with a High-Impact Target Operating Model

target operating model TOM aml automation KYC processes

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An exclusive article by Fred Kahn

Financial institutions operate under relentless regulatory pressure to ensure the integrity of their AML/CFT processes. Central to meeting these expectations are workflows surrounding Know Your Customer (KYC), Client Lifecycle Management (CLM), onboarding, offboarding, Ultimate Beneficial Owner (UBO) identification, screening, and perpetual monitoring. Despite investing in modern solutions, many institutions remain trapped by legacy mindsets and systems, approaching compliance as a checklist of disconnected tasks rather than a unified, efficient journey underpinned by a strategic Target Operating Model (TOM).

The disconnect between tactical compliance and a robust operating model not only undermines efficiency but also increases the risk of regulatory breaches. A clear TOM aligned with regulatory requirements and operational realities is essential for achieving sustainable, scalable, and automated AML programs. This article explores how a high-impact TOM can reshape financial crime compliance, why most organizations fail to prioritize this step, and how the right expertise can guide the shift toward future-proof AML strategies.

Target Operating Model as the Foundation for AML Transformation

The concept of a target operating model has its roots in organizational design, but within AML and financial crime compliance, it refers to the end-to-end structure, workflows, technology, data, and governance that define how compliance objectives are delivered. A TOM in this context establishes how an institution should process KYC, CLM, onboarding, offboarding, reviews, UBO and entity data collection, document gathering, screening, and ongoing monitoring activities.

Global regulatory frameworks, including the Financial Action Task Force (FATF) Recommendations, the EU’s Anti-Money Laundering Directives, and the USA PATRIOT Act, set out high-level requirements for these processes. However, they stop short of prescribing how institutions must structure their internal workflows. This leaves significant room for interpretation, often resulting in fragmented, inconsistent approaches—especially where legacy systems constrain innovation.

Rather than a series of standalone processes, a well-designed TOM sees all AML/CFT activities as interconnected stages in the client lifecycle. This holistic approach is the linchpin for:

  • Seamless onboarding, where customer data and documents flow automatically from front office to compliance without manual handoffs
  • Continuous monitoring and review cycles that adjust risk assessments in real time, enabling perpetual KYC (pKYC)
  • Offboarding processes that are proactive, efficient, and properly documented, minimizing client friction and regulatory exposure
  • Data collection mechanisms that reduce duplication and errors by maintaining a single, golden source of truth for all entity and UBO data

A mature TOM optimizes technology investments, clarifies roles and responsibilities, and standardizes policies across jurisdictions. As a result, compliance teams are empowered to scale operations, adapt to regulatory change, and move beyond reactive, manual controls toward preventive, automated strategies.

Why Financial Institutions Struggle to Prioritize TOM

Despite the proven benefits, many financial institutions approach TOM as an afterthought. Several factors contribute to this disconnect:

  • Legacy System Constraints: Institutions often inherit fragmented platforms that do not support end-to-end workflows. As a result, TOMs evolve as a workaround to existing limitations, rather than as a strategic enabler of transformation.
  • Task-Driven Compliance Culture: Instead of viewing AML/CFT as a unified journey, many organizations break compliance down into task lists, with each department or team focused on its own piece of the puzzle. This siloed mentality is reinforced by audit requirements and regulatory pressure to “tick the box” on individual obligations.
  • Regulatory Complexity: Regulatory guidance is evolving at a rapid pace. Institutions may be hesitant to overhaul their TOM for fear of misinterpreting requirements or triggering costly implementation projects.
  • Short-Term Thinking: Upgrading a TOM is a significant undertaking with long-term benefits. Under pressure to demonstrate quick wins, organizations often focus on incremental improvements in detection or onboarding times, rather than stepping back to redesign the entire operating model.
  • Resource Limitations: Lack of internal expertise or available budget to lead a TOM redesign can result in inertia, especially for smaller institutions or those facing more pressing operational challenges.

Ultimately, by treating TOM design as a side effect of system selection or regulatory updates, organizations risk missing the opportunity to build resilience, agility, and competitive advantage into their AML/CFT programs.

Rethinking AML Processes with an Effective TOM

Financial crime compliance functions that succeed in the digital era view TOM as the primary enabler of transformation, not an afterthought. The process starts with mapping the full customer journey, from onboarding through ongoing due diligence to offboarding and exit. Each touchpoint is analyzed through the lens of risk management, regulatory requirements, operational efficiency, and customer experience.

Key principles for a future-proof TOM include:

  • Process Integration: Instead of treating onboarding, periodic reviews, UBO data collection, and screening as discrete events, integrate these workflows so that data is reused and tasks are triggered automatically based on risk events or regulatory changes.
  • Technology Alignment: Select AML solutions and platforms based on their ability to support the target TOM, rather than adjusting the TOM to fit existing technologies. Modern platforms should offer workflow automation, dynamic risk scoring, configurable rules engines, and real-time data synchronization.
  • Data Management Excellence: Establish a single source of truth for all client and entity information, accessible across business lines and jurisdictions. This minimizes duplication and errors, streamlines reviews, and supports more accurate risk assessment.
  • Agile Governance: Ensure roles, responsibilities, and escalation paths are clearly defined and embedded in workflows. Strong governance supports timely decision-making and helps institutions adapt to regulatory changes without disrupting operations.
  • Perpetual KYC and Continuous Monitoring: Shift from periodic reviews to real-time monitoring of risk factors, leveraging technology to flag suspicious activity or trigger enhanced due diligence instantly. This reduces regulatory risk and positions the institution to respond rapidly to threats.

Real-world examples show that organizations that prioritize TOM see significant gains in efficiency, reduced error rates, and stronger regulatory relationships. For instance, banks adopting perpetual KYC models report shorter onboarding times and fewer false positives in transaction monitoring, demonstrating the compounding value of holistic process design.

The Critical Role of Experts and Consultants in TOM Redesign

Redesigning a TOM is not just a technology or compliance project—it is a transformation initiative requiring specialized expertise across business architecture, regulatory analysis, data management, and change management.

Consulting firms and independent experts bring several advantages to this process:

  • Objective Assessment: External advisors provide a fresh perspective on legacy challenges, operational pain points, and regulatory gaps that may not be visible to internal teams.
  • Regulatory Intelligence: Consultants keep pace with global and local regulatory developments, ensuring that TOM designs anticipate rather than simply react to new obligations.
  • Solution Selection Support: When choosing an AML software platform or compliance solution provider, consultants help map technical capabilities against TOM requirements. This prevents the common pitfall of shoehorning processes into off-the-shelf solutions that do not fit the organization’s risk profile or operating environment.
  • Change Management: Experts guide organizations through the cultural and operational shifts required for TOM adoption, ensuring stakeholder buy-in, training, and effective communication throughout the transition.
  • Benchmarking and Best Practice Sharing: Consultants draw on experience across multiple institutions to benchmark processes, recommend proven approaches, and avoid pitfalls observed elsewhere in the industry.

Engaging with external experts should not be seen as a sign of weakness but as an investment in sustainable compliance maturity. Their guidance can be the difference between a cosmetic TOM redesign and a transformation that delivers long-term value.

Conclusion: Building the Future of AML through TOM Leadership

Financial institutions have never faced greater complexity or scrutiny in their AML/CFT obligations. While the temptation is strong to focus on incremental fixes or new technology deployments, the foundation for efficiency, scalability, and automation is a well-crafted target operating model.

By aligning compliance activities under a single, strategic TOM, organizations can integrate onboarding, offboarding, reviews, entity and UBO data collection, client documentation, and perpetual monitoring into a seamless, automated journey. The key to unlocking this future lies in shifting the mindset from task completion to workflow orchestration, supported by the right expertise and solution partners.

As regulatory demands grow and technology evolves, the institutions that thrive will be those that put TOM at the center of their AML strategies—delivering not only regulatory compliance but operational excellence and a superior customer experience.

Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.

Need some help selecting the right solution or the right advisory firm? Send us an email at info@fincrimecentral.com.

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