Anti-money laundering (AML) professionals gathered en masse in Florida this week for the first post-pandemic ACAMS Hollywood Conference. Our team has gathered the latest views on the ground in this ACAMS roundup.
1. Cryptocurrency looms large over AML teams
New challenges are part and parcel for AML professionals, but the speed at which cryptocurrency has become a concern is relatively unprecedented. And the shadow it is casting over AML teams was clear at ACAMS Hollywood. With at least five agenda sessions looking at distributed ledger technology (DLT) and its applications in global payments, plus countless sidebars and conversations, there’s no time like the present to consider your team’s plan to counter financial crime in cryptocurrency.
ACAMS itself is launching a crypto certification for its members, which is a good first step. Its session, Demystifying Crypto: Inside the World of Digital Assets, was perhaps one of the most well attended, proving the industry appetite to learn more even if currently, as 70% of respondents in one session poll indicated, ‘My bank has little or noting to do with crypto assets’.
It seemed that perhaps the US is willing to wait and see how other markets with more advanced digital asset programs, or central bank digital currency (CBDC) programs regulate these and learn lessons from those first movers. Although the policy makers made it clear they remain conscious that the speed of international transfer for new crypto and digital currencies makes this a near-term priority.
Interestingly, Katie Ford, Deputy Associate Director, Policy Division, Financial Crimes Enforcement Network (FinCEN) remarked that in her opinion Non-Fungible Tokens (NFTS) are in fact covered under current digital asset AML programs, showing that AML regulators are already beginning to get to grips with crypto.
2. Need for speed in AML technology and operations
AML technology operations have become increasingly complex, as organizations have sought to tackle each new threat or regulatory mandate with workarounds, add-ons and point solutions. Now these same teams must tackle the tangled web they wove and simplify legacy environments in order to be ready for the future. There are several ways that financial institutions (FIs) are viewing this:
- Consolidation of AML and fraud systems into a holistic risk platform
- Augmentation of existing solutions with new capabilities to enhance scoring and manage risk
- Deployment of solutions into the cloud, to reduce overhead and improve speed to market
The need to tune existing systems was a key theme as the conference participants look to manage increasing volume and velocity in designations and other changes to sanctions and AML requirements. With current global events, designations updates must be made daily to comply with increasing economic sanctions.
Elizabeth Rosenberg, Assistant Secretary for Terrorist Financing and Financial Crimes, U.S. Department of the Treasury gave a strong keynote, where she emphasized that FIs cannot manage these new risks passively and must be able to quickly adapt to daily new designations and identify their exposure. In the past this process might have been a less frequent and less time-pressured event, but now FIs need a real-time response in identifying individuals that are added to lists. Throughout, Rosenberg referred to AML and compliance teams as the ‘foot soldiers’ in today’s economic policing, emphasizing the importance of these roles, processes, and technologies in protecting the world.
Ultimately, technology modernization is focused on ensuring that AML systems fulfill their core purpose and manage risk exposure for FIs. Modernization programs must keep this front of mind as FIs choose a path for their transformation.
3. Explainability remains unexplained by regulators
The regulatory roundtable is the most hotly anticipated session at any ACAMS conference, with representatives from the Federal Deposit Insurance Corporation (FDIC), Financial Crimes Enforcement Network (FinCEN), Financial Industry Regulatory Authority (FINRA), Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board in attendance at the Hollywood event.
But surprisingly, there was not yet mention of effectiveness standards in AML and Counter Terrorist Financing (CTF) programs. When Featurespace responded to FinCEN’s review of the Bank Secrecy Act (BSA) Regulations and Guidelines earlier this year, we highlighted the need for new guidance to include “Effectiveness Standards” or definitions of acceptable levels of effectiveness for both false positives and false negatives in order to establish what is an acceptable level of explainability in advanced machine learning models.
However, the roundtable participants shared that they are in the process of reviewing the submissions to the Request for Information processes they have been running, so perhaps effectiveness standards will be firmly on the agenda next year. To better serve this innovation within the bounds of a regulatory framework, regulatory sandboxes would be a good initial step, although the regulators were not forthcoming on committing to delivery or timelines on these.
4. AML teams are ready for machine learning
Although the benefits of machine learning are well understood by the AML community, the operational and implementation challenges have been a harsh reality impeding many FIs from levelling up their financial crime prevention. 56% of respondents during the regulatory roundtable indicated that adoption of AI at their financial institution has been helpful in one or two areas, but only 18% felt it had created a revolution in how they operate across the board. Kieran Beer, CAMS, Chief Analyst, Director of Editorial Content, ACAMS commented that this was much more positive than in previous years.
But technology advances have made machine learning more accessible than ever, for FIs of all sizes, and broken down some of the adoption and operational barriers that once hindered the machine learning revolution in AML.
Scott Nathan, Global Head of AML Transaction Monitoring at Citi spoke about this on a panel titled, Brainstorming: What the Next Wave of Artificial Intelligence Means for AML, as he discussed the need for real-time AML analytics, and empowering his investigators with the best tools to take advantage for data science technologies and apply live to real life economic crime prevention.
For more insights into how you can get to grips with real-time machine learning, read our white paper: AI Innovation in AML Transaction Monitoring
The event overall felt energized, with AML and compliance teams keen to understand new trends and challenges in their market. Attendees were engaged with regulators, providing experience and inputs from the front-line that will help better shape future frameworks, and ensuring that we all work together to make the world a safer place to transact.