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

Abstract

This research examines how Information Systems auditing strengthens AntiMoney-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,
advanced data analytics capabilities, and systematic control evaluation methodologies. This research contributes both theoretical advancements in AML compliance
assurance and practical implementation guidelines for financial institutions seeking to enhance their anti-financial crime capabilities through robust information
systems auditing.