Anti-money laundering (AML) is a fundamentally critical responsibility of the modern financial enterprise; it effects the stability of the financial system and is essential to safeguarding national and global interests. It is also a control function that despite significant political attention, regulatory reform and financial investments globally, has not been sufficiently effective at combating the challenges of corporate tax arbitrage, the narco-economy, global terrorism and human trafficking. In fact, money laundering has more than doubled from $1 trillion in 1989 (the year the Financial Action Task Force on Money Laundering (FATF) was formed) to over $2 trillion in 2016.*
Why are AML efforts falling short?
In summary, AML is both a cross-core system and a cross-enterprise challenge. Within institutions, it is a cultural program driven from the top and across every geographical location, impacting customer interactions and enterprise-wide customer processes, and heavily influenced by the legal department.
As a result, AML presents impressive technical, organizational and cultural integration challenges, which few institutions have been able to effectively address. However, the past few years have witnessed interesting and accelerating technical and automation developments that are worth exploring when looking to improve AML and financial crime oversight and management.
Even with these technical developments, many firms’ senior management teams have yet to oversee the adoption of innovations that other parts of the enterprise are currently utilizing and could be leveraged effectively to manage financial crimes.
These developments should also be taken seriously by regulators to gauge overall firm compliance efforts and motivation, particularly as the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission have now established Offices of Innovation.
It is worth noting, too, that although technology advances and adoption are good for building effectiveness into AML and financial crimes initiatives, the technology alone does not fix a problem, especially in an enterprise-wide deployment. The same critical governance and line of sight that organizations build into the business programs need to also be planned into the requirements for enabling technologies at the forefront. The technology is never an end in and of itself.