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The changing world of anti money laundering

Written by International Compliance Association on Tuesday July 7, 2020


The world of AML compliance needs to change

Current thinking around anti money laundering (AML) is flawed and is in desperate need of a rethink. The fundamental nature of money laundering, and how we combat it, needs examining. To stop measures from falling short, new ideas, a reassessment of strategies, and a willingness to embrace fresh policies, procedures and processes are required within compliance.

At the 2019 AI and Blockchain summit in Barcelona, David Lewis, Financial Action Task Force (FATF) Executive Secretary, enumerated the new and existing risks that technology and cultural change have ushered in.[1] The new FATF mantra, ‘Stop money laundering, save lives’, adopted from the fight against COVID-19, draws attention to the severity of the threat, and suggests a more potent and energised AML fight.   

Given FATF’s stance, we can now confidently assert that our role as compliance officers is to save lives. This begs the question: ‘but whose lives are we saving?’. In answering that question, let’s consider that more than 250,000 Mexicans have been killed in a grotesquely violent drug trafficking business and war. Then there are the tens of thousands of people who die each year through poisoning and overdoses from illegal drugs, some of whom could be your neighbour, relative or even the child of a colleague in your office. The threat is very real, and very prevalent.

 

AML: Time for innovation 

We need to join the dots between the money, the crimes, the drugs and the unnecessary suffering, deaths and devastation caused to families and communities. We need to demonstrate to each other and our colleagues that what we do matters and that we need to do it differently. The greatest AML threat we all face is the acceptance of the status quo of a failed regime. Now is the time for courage, innovation and disruption. 

Set against this background the International Compliance Association (ICA) has partnered with Feedzai Inc., a highly-regarded machine learning and artificial intelligence (AI) FinTech, to bring new thinking and new ideas to the global AML community through a series of interviews with leading AML professionals. 

As part of the BIG Compliance Festival 2020, Martin Woods, a man sometimes referred to as the Wachovia whistleblower, will interview Robert Mazur, aka The Infiltrator (author of the book of the same name, adapted into a movie in 2016), on Thursday 9 July. The subject is ‘2020 AML and where we go from here’.

The interview will focus on two key areas of AML: training and transaction monitoring. In another 2019 speech, David Lewis was highly critical of the quality of AML supervision globally.[2] Woods and Mazur believe this can and must be addressed through the provision of improved training. Transaction monitoring, on the other hand, has never been easy, but by discounting the inevitable failures within the application of a risk-based approach to AML, we have made this increasingly more difficult.

Mazur claims that monitoring will be improved when staff are trained to higher standards, enabling them to have a better understanding of what to look for, and where and how to look for it. Without training, Mazur believes staff will not always understand the transaction data they examine.

 

Data sharing and transaction monitoring 

Woods contends that we – the global AML community – have historically failed to apply and exploit data that will both improve the outputs from transaction monitoring, whilst simultaneously frustrating money launderers and making banks/firms a more hostile environment to dirty money seeking a home. This joint endeavour is designed to demonstrate the benefits of collaboration and cooperation, the reduction of duplicated efforts and the sharing of knowledge (in particular failed processes) to ensure they are not repeated elsewhere.

Both Mazur and Woods firmly believe we have a common enemy in money laundering, just as we have a common enemy in COVID-19. They claim that lessons can be learnt from scientists fighting the virus and seeking a vaccine. Scientists are trying to save lives, for instance, and it is through collaboration and data sharing that this stands the best chance of succeeding. Further, the ‘contact and trace’ process is an investigative process to isolate and ultimately eradicate the virus. Thus, when dealing with suspicious activity – or, if you like, a potential money laundering infection – we need to understand how launderers work and think in order to give ourselves the best opportunity of identifying the wider money laundering contamination.

So please do listen in on Thursday or pick up the podcast afterwards.

 


References:

[1] FATF, ‘Remarks at AI & Blockchain Summit, 21 November 2019’, 21 November 2019: https://www.fatf-gafi.org/publications/fatfgeneral/documents/speech-digital-id-nov-2019.html – accessed July 2020

[2] FATF, ‘Keynote speech at the 7th International Anti-Money Laundering and Compliance Conference, 10 December 2019’, 10 December 2019: http://www.fatf-gafi.org/publications/fatfgeneral/documents/speech-international-aml-compliance-dec-2019.html – accessed July 2020


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