The current compliance regime faces significant challenges – as evidenced by the fact that the industry simply does not find crime. The chilling statistics reveal that around 1% of Suspicious Activity Reports (SARs) raised by compliance teams result in conviction. Furthermore, the recent FinCEN SAR news is already resulting in new regulatory approach proposals to enable 1.targeted, 2.dynamic, and 3.automated compliance – themes that are set to enable true effectiveness and efficiency in protecting the financial ecosystem from criminal abuse.
With the financial services industry under extreme pressure, change is needed now more than ever. The sector is facing multiple issues, including COVID-19 related challenges such as massive bed debt, new working patterns, and ballooning opportunistic crimes, alongside trade wars between China and the US, and complex economic recovery bailout packages. Innovation in technology must be the way forward.
1. Innovation must start with a targeted compliance regime that focuses on the strategic AML prioritisation of crimes/typologies/OCG rings. This strategic prioritisation should originate from information sharing between governments, law enforcement organisations, and the financial industry. But Information sharing needs effective technology solutions to be impactful and efficient.
2. Once the priorities of each EU country are set, banks can focus their compliance experts/investigators on the organised crime activities that each government wants them to focus on (instead of concentrating efforts on lower level/ lower risk cases). This way they will have time to gather as much information as possible and thus file more intelligent SARs. Again, technology is the enabler for effective and efficient investigation here, allowing the banking sector to access swift and dynamic data and insights into customer behaviours.
3. Low risk cases can and should be automatically investigated by machines before being reviewed by an investigator. Machines with AI can auto build cases and dispose of them (for example RPA; auto grab data, clean data, fill-in missing data, verify data, link data, graph data… bundle cases if they are done by the same entity (roll up) and auto populate SARs). Using technology in this way means an investigator will only have to review the bundles of low risk alerts and file them to their local FIU. The machine will learn and constantly improve, leading to machines filing low level SARs by themselves and running over sample data sets to pick up trends.
4. Cloud technology could also be an enabler for cost reduction and efficiency across the industry – although its success depends on each bank’s readiness to embrace it. Some banks may be ready to go all cloud, whereas others may just want to have analytics in place.
This virtual briefing highlights the potential challenges, pitfalls and opportunities arising from the COVID-19 Financial Crime Aftershock. We will explore the topics of efficiency and cost saving and discuss how technology can both minimise the threats and empower the industry in the fight against crime.
¹ In 2018, Europol reported that the precision in detecting criminal fund transfer was only about 1% – From suspicion to action – converting financial intelligence into greater operational impact (Financial Intelligence Group, Europol, 2018). The European Parliament has also recognised that just 1.1% of criminal profits get confiscated – Criminal proceeds: making it easier to freeze and confiscate across the EU (European Parliament News, 2018).