ACFCS Financial Crime Special Video: NICE Actimize’s Stephen Taylor Talks Conquering Compliance with Consortium, Federated Learning, Training Tips to Drive Effectiveness Regionally, Globally and More – CFCS
Tips, Trends and Timestamps
2:00 – Program efficiency, cross-bank data divination, regulatory vulnerability.
What does efficiency look like in practice?
How can a consortium approach work by taking data from multiple banks to find broader trends?
Also, how can you work with regulators, be open, honest, and transparent, without them turning against you and finding flaws in your program?
5:00 – For the banking compliance professional, what should I do differently?
What should or could banks do to adapt to these newer and seemingly tougher efficiency standards and be seen as a true ally of law enforcement?
Let’s start with AMLA 2020 and the “highly anticipated” AML priorities. Regulation, in all its various forms and parts, is always forthcoming.
Regulators need to get more effective information. We are not really efficient at the moment.
There are 2 trillion dollars laundered each year and we can count one or two percent of it. There are 40 million people captured in modern slavery. These are terrible statistics. We need to be more efficient.
Much of the information sent to regulators and law enforcement is not that effective, insightful, or useful. And there’s a lot of sorting through the data to find the reports that are really useful.
There is a lot of time and energy to structure the SARs.
8:30 a.m. – What’s the deal with that? So many things have changed? Nothing has changed? Which is it?
What is the shade? These AML priorities are not hidden in some US Treasury, GAO, or Congressional reports. They are in the foreground.
So what does this mean for you? The AML professional, analyst or investigator in the field trying to decide if, how and when you should file a suspicious activity report (SAR)?
Here is the answer: the needle has moved to the pressure point of reporting suspected money laundering to better identify, analyze and report the underlying crime, the alleged illegal activity generating the illicit financing.
Digging to discover that your transaction monitoring system’s red flags are hallmarks of human trafficking has gone from a must have to a need.
10:00 a.m. – Technology plays an important role in how banks can be more efficient.
They were buried a bit, but now they are in the foreground.
There’s so much more banks can do to really help identify the real crime, the needle in the haystack. Machine learning and AI. The more data you give to the AI, the better.
What else can banks do to make it easier to find the real crimes? Engage new strategies, such as the concept of entity resolution, network risk, and link analysis.
What can it do? You can understand the individual and understand the hidden connections between various individuals and entities.
Instead of getting 95% false positives. This can be significantly reduced.
It takes a lot of the burden off the industry, to find everything manually, with the pressure on humans to always make the right decision.
This still relieves regulators of the burden of finding anything that a bank’s AML program might have missed that was suspicious or potentially criminal money laundering activity related to organized crime, human trafficking rings, grand corruption or the financing of terrorism.
All of this helps to give better information to law enforcement.
1:00 p.m. – The beating heart of AMLA. How to boost public-private partnerships? Consortium-based learning and analysis – data across multiple banks.
One of the biggest challenges in the industry is breaking down silos. This needs to happen at the institution level and across multiple banks in multiple jurisdictions.
The problem to solve: sometimes banks are structured very rigidly, here is the KYC team, here is my fraud team, here is my AML team. They probably don’t even know each other.
Criminals do not go to a single bank to do all their money laundering institutions. It is not a one-stop-shop in a single establishment.
You must understand the entity. You need to understand transactions. And you need to understand the control infrastructures in place.
One of the challenges for the industry as a whole is really tracking the flow of money between multiple institutions, as criminals use them to avoid the money trail. We need to find a better way to track that money as it moves from bank to bank.
4:00 p.m. – We need to find a way, a better way to find the flow of money.
This can be done via 314(b), but perhaps under the AMLA it becomes mandatory rather than just voluntary. It may be something that actually happens.
But nowadays, there are other ways to share data.
You can apply machine learning in multiple institutions and derive insights from it. Federated learning is a non-invasive way to obtain information from individual institutions without violating data privacy laws.
Find out what information the whole sector can benefit from.
We’ve also seen regulators pushing AML sharing utility programs. In the Netherlands, there was one specifically on transaction monitoring. In the Nordic countries, one on KYC. And the Monetary Authority of Singapore also on KYC.
Technology, encryption, homomorphic encryption without violating any data protection legislation.
18:00 – What does a good SAR look like?
We talked about it at FinCEN in 2020, but what does good look like. What does a good SAR look like?
Many banks look like they file SARs with regulators, but they don’t return anything.
There is a feedback loop from law enforcement and regulators to financial institutions. If we can do this safely, banks will be able to better adjust their systems more effectively to detect financial crime in the future.
But it is a question of breaking down the silos, both within the institution and among the actors who fight more broadly against financial crime.
8:00 p.m. – One of the biggest questions we get: what are other banks doing?
The two main questions facing banks: what are other banks doing and what do regulators want?
Not sharing how to structure an AML program is not a competitive advantage.
Sharing secret sauce, insight, knowledge, and AML best practices won’t drastically change banks’ fortunes, but it could dramatically improve our ability to detect financial crime.
Doing them well is good for everyone. A rising tide lifts all ships.
22:00 – Moving from an “adequate” to an “effective” AML program, what it looks like in practical steps.
How do you move from a financial crime compliance program that’s tailored to examiners but seen as effective in terms of value and creating relevant and timely intelligence for law enforcement?
AML cannot be a checkbox exercise. We know we need to cover all of these things, so we put them in place whether they make sense or not.
The change focuses on large concentrations of risk. Is it meaningful to respond to this risk you have identified?
Instead of just having checks to have checks, you really need to look at the broader law enforcement priorities, the banks’ priorities, and the concentrations or risks.
What is the goal ? If it doesn’t achieve those goals, redirect and reprioritize, re-establish what is the priority and what is the goal. If it doesn’t meet these requirements, redeploy those resources in the right way.
24:00 – The second big thing is silo breaking.
There should be a dialogue between the departments to better understand the concentrations of risk and not conduct investigations in parallel. There is a multiplicative effect when efficiency is combined with efficiency
25:00 – The third thing is technology.
You need to choose the right technology to do the job, rather than just a rules-based approach, because 10-15 years ago that was the only way we could do it.
27:00 – What does the future hold for us? Regulators stepping aside or deeming you ineffective?
It may be a bit of both. Regulators are ready to do more pilots as partners, but they will always come, always reviewing and issuing fines whether banks want to or not, failing to have a strong program.
29:00 – A major pitfall for efficiency: the sliding scale of what is, and isn’t, “reasonably designed”.
While many banks and regulators appreciated that the Wolfsberg Group analyzes what the biggest institutions think about what efficiency is, a particularly picky wording: reasonably designed.
32:00 – When it comes to developing international AML programs: think globally, but act locally.
Examine major trends, such as the main recommendations and guidelines of the Paris-based Financial Action Task Force (FATF), which sets the global rules for combating money laundering, and at the same time examine what are the most recent changes. most important that have happened or will happen. happen, in places like the US, EU and other major economies.
Then overlay that with regional trends, like Asia, the Middle East, etc., and then finally incorporate local laws in the areas where you operate.
Also be careful with crypto, some countries say they are in, then out, then back in.
34:00 – The Pandora Papers: How opening this box can affect financial crime compliance programs.
In the world of changing and revolving, increasing and decreasing risks, these historical leaks, dumps of unspoken negative news, can shade and alter the ranking of customers and companies – even if they technically did not break the law and require a immediate risk reduction.