AML, fraud and AI in 2020; where’s my dot-matrix printer?

Feb 04, 2020
Feb 04, 2020
0 min. read
Business risk consulting Anti-money laundering Financial services

As we move into the third decade of the 21st century, I’m reminded of one of the first anti-money laundering fines I was asked to work on as I began my AML career. It was a $40 billion bank, and it was a whopping $50 million fine for noncompliance to establish a proper program, and if memory serves, not providing the relevant documentation to the regulator when requested. After about six months, we managed to get the cease and desist order lifted, but the reputational damage was done before my team even walked in the door. Apparently, in 2019, financial crime compliance fines exceeded $8 billion globally; a far cry from the early 2000s and my whining of a $50 million fine.

I started writing this article to discuss some tips and trends; then I started swaying to a 2020 outlook of where AML, fraud and cryptocurrencies are converging with artificial intelligence. However, as I look back over my 24 years of experience in law enforcement, banking, fintech, technology and consulting, I’m finding myself in search of the other readers out there that remember when it was a dot-matrix printer, a green-bar report and a single analyst trying to detect structuring activity.   

Now, we have web-based interfaces, machines learning the activity of our customers and robots automating the tasks that I used to work on and spend countless nights copying/pasting information into my investigations in order to support my decisions. Of course, to be honest, when I first started with the automated monitoring for investigations, I recall a simple, “false positive,” drop-down menu that I selected and moved on my merry way to the next alert in a queue of 800 work items.

I am including a superb article written and posted to the Association of Certified Financial Crime Specialists that provides a briefing on some interesting metrics over the last years. 2014 still holds the record for highest total fines at over $10.89 billion, which included a $9 billion fine to a $3 trillion bank for penalties around sanctions compliance. If that fine was removed from the equation, 2019 would take the lead in penalties from our regulators.

If we are going by the numbers, the article includes the following:

  • 58 AML penalties globally in 2019 ($8.14 billion)
  • 2019 set a record year in the number of penalties issued; 58 ahead of 2016 with 47 fines
  • 29 AML penalties globally in 2018 ($4.27 billion)

Penalties and scrutiny of our programs are increasing, clearly; but much like history repeating itself, when something new comes over the horizon, our first instinct is to “de-risk,” such as with marijuana and cryptocurrency. De-risk simply means that we aren’t going to provide them services. But with the Financial Action Task Force paving the way, we once again understand that it’s not practical or sustainable to ignore particular sectors. If you don’t believe that you are exposed to cryptocurrency activity and aren’t filing on potential suspicious activity, you best have a plan and a thorough risk-based report to back it up. Regulators are privy to the exposure, and it’s amazing the expectations world banks are setting to proactively address the, “cryptosphere.”

There’s a great deal to think about for 2020. Remember when it was just the annoyance of someone ahead of you in the grocery line writing a check to slow your departure from the tumultuous task of buying shampoo and vegetables…, which we used to have to buy at two separate stores. Now I have to think about if someone is looking at all my transactions, are they filling out any reports on my activity and do they care I went to one store instead of three? Well, I’m more boring and doubt my purchases are really garnering anyone’s attention. But who uses checks anymore? When are all transactions going to be monitored by robots and sending me text messages telling me that the grapefruit I just put in my cart is cheaper from the online pantry with free delivery before I even make it to checkout? …And it can be delivered to my home before I even get there from the grocery store!

We live in a very different world, a new world; one where in our industry of AML, fraud and AI that we must leverage cutting-edge technologies and go in search of those people with the experience to apply the apps, the bots and the machine learning to our traditional methods of performing financial transactions. Changing and growing isn’t always in our nature, it’s up to us to decide how and when we do it. Don’t wait for the regulator to tell you, to fine you, or for the criminal to hack you and expose you. Be proactive and integrate into this century with your peers to protect your business, your employees and your customers; protect your future.