Entity resolution in Anti-Money Laundering (AML) compliance is the process of identifying, matching, and linking records that refer to the same individual, business, or organization across multiple datasets.

This process is crucial because criminals often disguise their identities through misspellings, aliases, shell companies, or complex ownership structures. Without effective entity resolution, financial institutions risk missing connections to sanctioned persons or suspicious activities.

Entity Resolution In AML

Entity resolution in AML refers to the use of algorithms, fuzzy matching, and graph analytics to unify fragmented records into a single, accurate identity.

For example, a single person may appear under different names in customer files, transaction logs, or sanctions lists. By resolving these fragmented records into one entity, compliance teams gain a clearer risk profile.

Research in computer science shows that entity resolution is a key method for linking records accurately when dealing with large and complex datasets. This makes it an essential tool in environments where organisations process high volumes of customer and transaction data

Why Entity Resolution Matters In AML Compliance

Entity resolution matters because it enhances the accuracy of customer screening and transaction monitoring. Regulators expect financial institutions to detect indirect as well as direct relationships to sanctioned persons and high-risk entities.

The FATF emphasises that firms must understand beneficial ownership and customer risk profiles to prevent money laundering and terrorist financing. Absent robust entity resolution, fragmented records of ownership or control can create blind spots in AML frameworks.

Solutions like Watchlist Management and Customer Screening are strengthened when combined with entity resolution techniques, as they provide context beyond simple name-matching.

Key Benefits Of Entity Resolution In AML

Financial institutions adopting entity resolution see several benefits:

• Improved Accuracy: Reduces false positives in sanctions and watchlist screening.

• Hidden Relationship Detection: Identifies links across subsidiaries, intermediaries, or complex corporate networks.

• Operational Efficiency: Cuts investigation time by consolidating duplicate alerts.

• Regulatory Compliance: Strengthens evidence of proactive monitoring during audits and regulatory reviews.

Entity resolution also supports Alert Adjudication by ensuring investigators are working with unified and accurate identity records.

Regulatory Expectations For Entity Resolution

While regulators do not prescribe specific technologies, they stress the importance of reliable customer identification and monitoring.

• The FCA requires firms to have effective financial crime systems and controls in place, including robust customer due diligence and identification processes, as set out in SYSC 3.2 of the FCA Handbook and updates to its Financial Crime Guide.

• The European Banking Authority (EBA) through its Guidelines on ML/TF Risk Factors also expects institutions to use advanced risk assessment tools and consider customer, product, geographic, and technological channels when managing money laundering and terrorist financing risk.

This makes entity resolution an implicit expectation for institutions handling high volumes of complex data.

The Future Of Entity Resolution In AML

The future of entity resolution lies in combining AI, machine learning, and graph analytics. These technologies can identify subtle patterns and relationships across global datasets in real time.

As financial crime networks grow more sophisticated, entity resolution will be vital for understanding ultimate beneficial ownership and cross-border risk. Future AML systems will integrate dynamic risk scoring and continuous monitoring with entity resolution at their core.

Strengthen Your AML Compliance With Entity Resolution

Entity resolution gives financial institutions a sharper view of risk, enabling faster detection of suspicious activity and stronger regulatory compliance.

Contact Us Today To Strengthen Your AML Compliance Framework