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Financial Crime Fighting Lessons from the Experts

10/12/22 6 minute read

Five Takeaways from Aite-Novartica Group’s 2022 Financial Crime Forum

Fighting financial crime is a team effort. Recently, I attended the Aite-Novarica Group’s 2022 Financial Crime Forum, which brought together hundreds of financial crime professionals across banking, technology, and consulting organizations to share valuable lessons gleaned from working in the industry. 

While attending the Forum’s anti-money laundering (AML) track, I picked up on five key trends in fighting financial crime that can help us better understand the state of financial services regulations and where the industry is headed.

1. Balancing innovation and explainability

Over the last decade, AI, machine learning, and automation in general have moved from abstract, cutting-edge concepts to a near expectation. Not only have regulators already given financial services organizations tacit permission to implement these solutions, but they’ve also grown to expect firms to be able to defend and reconstruct how they are resolving, hibernating, or escalating AML, CDD and Sanctions alerts – whether those decisions were made using AI or analysts. 

This trend is by no means new, but continuing to progress. In the words of a recent expert from our last webinar, Andy Shoyer, Partner at Sidley Austin LLP, “If you aren’t at least a little bit ahead on technology, you’re probably behind.”

2. Proactive communication with regulators

The first trend paved the way for financial services firms to propel the industry. Since regulators have not set an explicit benchmark for the implementation of innovative technologies, there’s an opportunity to lead regulators to a mutually beneficial program where effectiveness is not sacrificed for efficiency. 

This strategy works best when your bank examiner isn’t surprised by the new technologies and processes you’ve launched, as they tend not to like surprises. Having clear communication of what your expectations and goals are, how you’re implementing them, and which mitigating controls you have in place is essential – not only to the program succeeding, but also to passing regulatory muster.

3. Acting according to purpose – not just policy

In areas like compliance, “check the box” is about as close to a 4-letter insult as you can get. No one wakes up in the morning wanting to check the box, but this oversimplification speaks to an undeniable point. There are occasionally steps that have to be followed that are not relevant to the current situation. Much like the explainability and transparency points above, establishing why you did or didn’t follow certain steps, and having the evidence to back up your decision, will go a long way to moving beyond the box-checking stigma compliance professionals get.

4. Looking for risk even when it’s not trendy

One session focused on the emergence of “AML for cryptocurrency,” and while that would make for a well-search-engine-optimized blog, there was a larger story beyond Bitcoin, Etherium, or any of the dozen others. The risk is in where the money is going and coming from – not what the money is. In fact, the point was well made that cash is much harder to trace than crypto!

Whether it’s a crypto-exchange, cannabis-related business (CRB), or importer-exporter, there is often more risk in not knowing what the business is (and often because the business didn’t tell you), rather than the inherent risk in the type of business. Piecing together the details of what your business customers do, who they do business with, and where the money goes is key to managing any kind of risk – whether it’s trendy or not. Having tight risk thresholds for a handful of Bitcoin day traders with disposable income is probably not the best use of your investigators’ time.

5. Putting it all together is still the hardest part

The conference started with a discussion on orchestration solutions, basically, a system to manage all your systems, and ended with a session about sharpening investigations through data. (Obviously, I was biased towards the latter.) But the common theme across both of these is, one tool, system, or data set is never enough; it’s only by combining the puzzle pieces that we start to see the image. As with many puzzles that have more than a few pieces, this is easier said than done – and often, investigators won’t ever get all the pieces. 

Overall the conference left me with one key takeaway: While many aspects of AML compliance and financial crime are done better, faster, and more consistently with AI, robotic process automation, and machine learning, there will always be the need for human expertise to make decisions. And that’s where we come in – getting the right insights in front of the right investigators to help them make the right decisions. Now, off to buy some Bitcoin!

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