Alert adjudication is the process of reviewing, investigating, and resolving alerts generated by compliance monitoring systems — particularly in anti-money laundering (AML), sanctions screening, and fraud detection programs. The goal is to determine whether an alert is a true positive (indicating actual suspicious activity) or a false positive (triggered by benign behavior). 

In a world of increasing regulatory scrutiny, adjudication is one of the most resource-intensive parts of financial crime compliance. Without efficient and accurate adjudication, institutions risk overwhelming their compliance teams, delaying investigations, and missing genuine threats.

Why Alert Adjudication Matters for Financial Institutions

Modern AML systems, like those used in FacctShield, often generate thousands of alerts daily. These can stem from sanctions matches, transaction anomalies, or adverse media hits. Left unchecked, this volume can create alert fatigue, causing staff to miss high-risk cases or waste time on low-priority ones.

Effective adjudication streamlines this process by:

• Reducing false positives

• Prioritizing true risk signals

• Providing audit trails for decisions

• Enhancing regulatory compliance

The process plays a central role in AML Risk Assessment and AML Reporting, ensuring only the most relevant cases escalate to suspicious activity reports (SARs).

The Alert Adjudication Workflow

Alert adjudication usually follows a standardized workflow, which helps ensure consistency and traceability:

1. Alert Generation

Alerts are triggered by rule-based systems or AI models. These may relate to high-value transactions, PEPs, or matches on Sanctions Screening lists.

2. Triage and Prioritization

Initial filtering helps sort alerts based on risk levels, urgency, and complexity. This step often uses algorithms and scoring models to identify which cases require manual review.

3. Investigation

Analysts examine the alert, review supporting documentation, and assess transaction history, counterparties, or customer profiles. Tools like FacctView offer real-time data and context during this phase.

4. Disposition

The analyst makes a final decision: dismiss the alert, escalate it for SAR filing, or flag it for enhanced due diligence.

5. Documentation and Audit Trail

All decisions must be recorded, along with rationale and supporting data. This step is essential for internal audits and external regulatory reviews — often part of Audit Trail Management.

Challenges in Alert Adjudication

The biggest issue is false positives, alerts that seem suspicious but are not actually risky. According to this ResearchGate study, false positive rates in some financial institutions exceed 90%.

Other common challenges include:

• Inconsistent analyst decisions

• Lack of centralized workflows

• Manual investigation delays

• Poor data quality or incomplete context

• Regulatory pressure to act quickly and justify every decision 

To address these, firms are investing in automation, AI Ethics, and continuous validation of adjudication models.

Role of AI and Automation in Adjudication

AI-powered alert adjudication doesn’t replace humans, it enhances their effectiveness.

Systems like FacctList and FacctShield use machine learning to:

• Assign risk scores

• Recommend alert dispositions

• Identify repeat false positives

• Detect emerging typologies

One arXiv research paper highlights how reinforcement learning models can help prioritize alerts based on evolving fraud patterns, improving decision speed without sacrificing compliance.

Still, explainability remains key. Regulators increasingly expect firms to provide transparency into how automated adjudication decisions are made, a core topic in Explainable AI (XAI) and AI Model Auditing.

Optimizing Adjudication with Workflow Tools

Many compliance teams are moving away from spreadsheets and email-based reviews to centralized case management platforms. These systems standardize decisions, enforce workflows, and reduce duplication of effort.

Key features often include:

• Real-time alerts from multiple sources

• Analyst queues and role-based access

• Integrated notes, document uploads, and decision logs

• Reporting dashboards and audit logs

Platforms designed for Compliance Workflow Automation can improve resolution time, consistency, and overall operational resilience.