In a turbulent global risk landscape, banks and other financial service providers rely on technology to help them manage their anti-money laundering (AML) and counter-financing of terrorism (CFT) compliance obligations. In recent years, AML technology has taken on a new significance, helping financial institutions to adapt to new regulations and counter increasingly sophisticated money laundering methodologies.
Technology remains a vital component of AML frameworks around the world and an indispensable tool in the fight against global money laundering. To help your business meet its challenges and achieve compliance in a constantly changing risk environment, read our guide to the top AML technology trends of 2022 and beyond.
1. Cryptocurrency Regulation
Cryptocurrencies have continued to gain traction in financial systems all over the world, along with a rise in related financial crimes, as criminals exploit crypto service providers to move money across borders anonymously. Research suggests that in 2021 cryptocurrency crimes generated around $14 billion in proceeds, with losses up 79% from 2020.
In response to the threat posed by cryptocurrencies, governments have been scrambling to introduce targeted cryptocurrency regulations, such as Singapore’s Payment Services Act, and the EU’s Anti-Money Laundering Directives. That regulatory trend is set to continue: Hong Kong, for example, will introduce a licensing regime for cryptocurrency service providers, while the UK has announced its intention to bring ‘certain stablecoins’ under the scope of AML legislation. In the US, the Biden administration has also announced a regulatory focus on stablecoins. The renewed focus on stablecoin regulation reflects proposals from several governments to develop central bank digital currencies (CBDC), facilitated by the same distributed ledger technology used for cryptocurrencies like Bitcoin. The Bank of England has published a discussion paper on a UK CBDC, while the European Central Bank has commented on the development of a digital euro.
2. Machine Learning
AML regulations require firms to analyse structured customer and transaction data in order to detect criminal activity. With that in mind, firms may enhance their data management processes by integrating artificial intelligence and machine learning tools, adding not only speed and accuracy to AML compliance but more intelligent outputs.
Beyond speed and accuracy benefits, machine learning tools add depth to structured AML information and are commonly trained to interpret and even make decisions about that data based on the algorithmic analysis of historical information. As regulations expand in scope to capture new fintech threats, such as cryptocurrency money laundering, machine learning systems are set to become important tools in risk-based money laundering solutions, helping companies make predictions about their customers based on historical data – rather than relying on time-consuming analogue data collection and analysis.
3. Information Sharing
Fintech money laundering threats often involve the movement of illegal money across borders, and entail criminal activities in more than one jurisdiction. In order to address cross-border money laundering, the Financial Action Task Force (FATF) includes information sharing guidance in its AML recommendations, and the EU has included a requirement for member-states to facilitate cross-border prosecutions in its Sixth Anti-Money Laundering Directive (6AMLD).
Information sharing will continue to be a global AML priority in 2022 and beyond, with financial authorities introducing dedicated platforms to make the process easier. In late 2021, the Monetary Authority of Singapore (MAS) launched its Collaborative Sharing of ML/TF Information and Cases (COSMIC) platform, while Hong Kong also introduced its AML Regtech Lab (AMLab) in order to facilitate public-private partnerships to identify suspected money laundering. In January 2022, the US’ Financial Crimes Enforcement Network (FINCEN) issued a Notice of Proposed Rulemaking to establish new information sharing protocols between US banks and their foreign branches.
4. International Screening
Effective AML goes beyond a requirement to collect data from international sources, and extends to the interpretation and analysis of that data. When firms screen for international adverse media, for example, they must be able to select suitable foreign language news sources, conduct customer matches accurately, and judge the content of the stories for relevance and bias.
With those requirements in mind, when firms conduct international screening, including transaction and adverse media screening, multilingual text analysis will be an increasingly important part of the process. In practice, this means the implementation of screening technology capable of accounting for a spectrum of language sets, including non-latinate systems such as Arabic, Mandarin, and Cyrillic, and for non-Western naming conventions, nicknames, and aliases.
5. Sanctions Compliance
The global sanctions landscape is becoming more complex. In addition to geopolitical events, such as Russia’s invasion of Ukraine in February 2022, sanctions may be imposed for a range of criminal activities, including state-sponsored cyber-crime and humanitarian crimes committed by individuals and companies.
In 2022, firms will continue to adapt to an increasingly complex and fast-moving sanctions environment by ensuring their compliance solutions keep pace with regulations. This means the ongoing implementation of technology capable of checking global sanctions lists and watch lists in real time in order to capture changes to risk profiles as soon as possible. Sanctions compliance solutions may be enhanced with intuitive name-matching technology and machine learning tools that allows companies to better eliminate false positives.
Next Generation AML Technology
Modern AML calls for the strategic implementation of technology as part of a risk-based approach to compliance. Implemented effectively, AML technology promises to not only enhance a company’s ability to detect financial crime but streamline the compliance process. Ripjar’s next generation AML solutions incorporate cutting edge compliance technology, enabling you to identify and manage risks in real time, and stay ahead of emergent trends, including new regulations and criminal methodologies.