Since the September 11, 2001, attacks, the U.S. government has put a greater emphasis on anti-money laundering (AML), particularly as it relates countering terrorism financing (CTF/CFT). The same goes for Indonesia, Canada, India, the European Union, and everywhere else that faces the threat of terrorism.
Over the last two decades, the nature, the aims and the methods of terrorism has evolved. So has the technology available to law enforcement and financial institutions (FIs).
As increasingly robust AML/CFT regulations put new pressures on financial institutions each year, it is worth examining the co-evolutions of terrorism financing and AML technology.
While it’s easy to think of CFT as a compliance challenge, we see an opportunity to act on our mission of using tech for good to deal a major blow to terrorism.
Counter-terrorist financing (CFT) enforcement regulations
Most countries have their own laws and regulations that govern how financial institutions operating with those borders should combat the financing of terrorism. For example:
- In the United States, the Financial Crimes Enforcement Network (FinCEN) publishes AML/CFT guidance each year.
- The European Union has its own legislation designed to fight money laundering and terrorist financing.
- In Australia, there’s AUSTRAC, whose mission regarding terrorism funding was defined in the 2006 AML/CTF Act.
Though the details of these regulations may vary, their intentions and goals are broadly the same. Therefore, we can speak generally about the challenges and opportunities financial institutions face when dealing with AML/CFT legislation.
The financing of terrorism has evolved dramatically
In its June 2021 guidance on national AML/CFT priorities, FinCEN underscored how difficult terrorist financing can be to track. International terrorism groups have begun to rely more on self-financed, self-radicalized actors to conduct malicious activities, FinCEN says, and domestic terrorism groups are insular and hard to penetrate.
For financial institutions, this makes AML/CFT monitoring especially difficult. A low-volume, low-spend account with a single deposit from an unknown funding source might not raise enough red flags for AML teams to recognize that the owner of that account is helping buy supplies for a terrorist attack.
Further, the U.S. Treasury Department’s own 2022 National Illicit Finance Strategy notes how investments such as real estate and digital assets offer further avenues for terrorist financing, and terror-prevention responses must stay a step ahead of those money-laundering techniques.
To gain visibility into the funding of terrorism, then, financial institutions need new perspectives. This is where machine learning technology comes in.
How financial institutions can be at the forefront of CFT
Featurespace has been implementing ARIC™ for anti-money laundering for several years now. One thing all these implementations have revealed is how flexible that solution is.
ARIC™ Risk Hub uses machine learning (ML) to monitor transactions. In doing so, it models customer behaviors, interactions, and channels to build incredibly robust profiles of people. By focusing on behaviors rather than typologies, the models become almost instantaneously responsive to money-laundering events.
This is a key capability for AML/CFT platforms because it can allow for real-time interdiction. Financial institutions are acquiring technology that can detect the suspected flow of money to terrorism groups, to facilitate timely and accurate filing of reports to the regulators and law enforcement.
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