Defining the scope of the anti-money laundering threat

Despite spending billions of dollars and hiring thousands of employees on anti-money laundering (AML) initiatives, banks and other financial services firms face significant challenges from a wide range of bad actors including sovereign entities, sponsors of terrorism, drug and human traffickers and other criminal organizations seeking to move money around the globe in ways that defy the scrutiny of regulators and law enforcement officers.  

The UN Office on Drugs and Crime (UNODC) estimates that two to five percent of global GDP ($800 billion to $2 trillion) is laundered each year and states on its websiteFueled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating global system in which “megabyte money” (i.e. money in the form of symbols on computer screens) can move anywhere in the world with speed and ease.” 

At a recent round table dinner in New York, compliance and IT executives from some of the world’s top banks met jointly with leadership from Accenture and Quantexa, a London-based data analytics firm providing solutions to fight financial crime, to discuss new threats and new approaches to AML. “We have new technology and data sources leading to new insights,” said Samantha Regan, Managing Director in Accenture’s Finance & Risk practice, in her opening comments. “The big challenge for financial services firms is making the right choices in putting together an effective solution.” 

Quantexa’s CEO Vishal Marria underscored Regan’s comments, noting that effective anti-money laundering operations are getting harder to conduct in the face of new threats. “Money launderers are smarter and better funded than they have ever been,” he said, “and new players are using technologically sophisticated approaches to move funds and avoid detection. Traditional approaches to fighting money laundering are not always working, but new technologies can help keep us one step ahead of the launderers.”  

The evening’s participants showed a keen awareness of regulatory requirements and the need, not only to fight money laundering and other financial crimes, but to provide authorities with documentation that mandated programs are in place and working.  As one participant noted, it is important to keep the regulators happy, but AML is much more than getting the right pieces in place and submitting the required reports.  Banks are trying to prevent terrible things such as terrorism and human trafficking from taking place by preventing the movement of illegitimate funds. And, while they are doing that, they should take steps to protect both their own organizations and the integrity of the worldwide financial system from some very bad people. 

As the evening progressed, the discussion focused on the use of technology to a) reduce the number of “false positives” and allow AML professionals to concentrate on significant events; b) explore new and existing data sources to put events in their proper context; and c) combine human and machine intelligence for enhanced outcomes.  Another participant said that banks operate in a transaction and rules-based world, but need to move to a customer and analytics-based environment.  

In the next blog, we will look at some of the issues raised by industry participants as well as the approaches and solutions discussed by Accenture and Quantexa.

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