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Engaging with emerging technology in anti-money laundering/counter-terrorist financing (AML/CTF)――both addressing its risks and seeking to exploit its potential――
has become an increasingly important part of the international agenda in recent years, as it has been featured in the objectives of at least the last four Financial Action Task Force (FATF) presidencies. The Argentine presidency listed partnerships with the fintech and regtech sectors in its 2017/2018 objectives. This emphasis continued under both U.S. and Chinese presidencies and it was under the latter that the standards were updated to include virtual assets and that guidance was issued on the use of digital identification.
FATF’s emphasis on technology continues to gather pace under the current German presidency with studies on the opportunities and challenges of new technology aimed at improving the efficiency of AML/CTF efforts by the private sector and super- visors; this is in addition to studies on systems to detect, prevent and deter money laundering and terrorist financing as well as understanding these risks. There is also a stocktake on data pooling and analysis aimed at helping the private sector make better use of artificial intelligence and big data analytics for AML/ CTF, and at increasing the efficiency of regulatory compliance while ensuring a high level of data protection.
So, it would be hard to miss the message: technology is important in AML/CTF. It is important as a source of risk, since rapid develop- ments in digital financial services will inevitably attract the attention of criminals seeking to move and hide illicit funds, and it is equally important as a source of opportunities for financial institutions (FIs) and their regulators, in collaboration with law enforcement, to mitigate money laundering and terrorist financing more effectively and efficiently. One area that shows particular promise is the use of technologies such as data analytics applications to identify fraud and money laundering networks. Banks have achieved significant results in this area, which have been fed into reporting to law enforcement including through the Fraud and Money Laundering Intelligence Taskforce, a police-led public-private information-sharing initiative with participation by the Hong Kong Monetary Authority (HKMA) and major banks. At both the strategic and tactical level, this has led to significantly improved collabo- ration between law enforcement and the private sector to develop financial crime typologies and to co-develop financial indicators to improve regulatory reporting from the banking sector, leading to better risk understanding and analysis in a virtuous circle. There is already very clear evidence that a technology-enabled, partnership- supported approach has led to improved law enforcement outcomes supporting investigations, prosecutions and asset recovery or other disruption of criminal networks.
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