In-Depth Feature Anti-Money Laundering 2020

Financier Worldwide Feature

The financial services industry has evolved significantly in recent years. While new entrants and technological developments have revolutionized certain aspects of the industry, they have also created new opportunities for bad actors to exploit weaknesses. Financial crime, including money laundering, is increasingly common and sophisticated, and financial institutions and regulators alike are striving to shore up the industry.

Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trends in anti-money laundering. Guidehouse's Salvatore LaScala, Partner and Global Investigations and Compliance Co-Lead provides trends and insights on the United States in the Anti Money Laundering 2020 In Depth Feature.

To what extent is financial crime growing in frequency and complexity? How would you summarize  recent trends in your region?

Salvatore LaScala: Money laundering and other financial crimes continue to be an area of focus for U.S. state and federal regulators. Last year, the Financial Crimes Enforcement Network (FinCEN) launched a new Global Investigations Division that will target domestic and international finance threats and related crimes, so it appears that the FinCEN is continuing to emphasize the importance of companies having strong Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance programs. The establishment of the new division is also an acknowledgment that money laundering continues to be a complex problem, often involving multiple jurisdictions. This division’s mandate to increase collaboration with foreign regulators on joint investigations will likely lead to more joint examinations and enforcement activity. In 2019 we have also seen the Office of Foreign Assets Control (OFAC) increase the number of enforcement actions as well as the overall dollar value of settlements compared to prior years.

How would you describe AML monitoring and enforcement activity in your region? What problems may arise for multinational companies as a result of the extraterritorial reach of certain laws, and greater collaboration between national agencies? 

Salvatore LaScala: AML and sanctions enforcement should remain a top priority in the U.S., and U.S.-based businesses that are active globally. U.S. and foreign regulators are also targeting other industries, not just financial services. For example, in 2019, OFAC enforcement actions included technology service providers, trade products, travel-related services, and oil exploration companies. One of the cases included extensive collaboration with the United Kingdom’s Financial Conduct Authority. Likely this trend toward multi-jurisdictional investigations will continue, especially given the creation of the new FinCEN Global Investigations Division. Companies should also be looking at their financial crime compliance programs and client activity holistically and across jurisdictions, as this is the approach taken by regulators. 

In what ways can companies utilize technology to help manage risks arising from AML?

Salvatore LaScala: Technology is essential to managing financial crime risk and compliance. Although regulators are publishing guidance indicating companies can take a risk-based approach to AML, they have come to expect that companies that have large numbers of clients and/or process large numbers of transactions need to use technology to assist with transaction monitoring, client due diligence, and screening. The challenge with many of the technology solutions, however, is the occurrence of false positives and irrelevant information. Increasingly, companies are exploring and implementing Artificial Intelligence/Machine Learning (AI/ML) and Robotic Process Automation (RPA) to assist with reducing false positives, and in streamlining the investigative process. When making these changes to the various compliance systems, it is critical to make sure that the process is becoming more effective and efficient. For example, AI/ML can also greatly assist in developing more effective and efficient detection scenarios by enhancing segmentation and developing revised detection scenarios appropriate for those segments. With a better class of alerts to disposition, adding RPA where appropriate can really help expedite dispositioning. Used together, the AI/ML and RPA increase the compliance process effectiveness and efficiency.

What overall advice would you give to organizations in terms of marrying technology with protocols, to enhance the efficiency of their AML capabilities and allow them to detect unusual behavior and identify red flags?

Salvatore LaScala: Before deploying a new technology solution, ensure you have good-quality data, or that the solution is picking up the correct data that will meet operational needs. Even if it works at the outset, you need to be vigilant that the data points don’t change. This is where it is important to have robust data governance standards. Implementation of AML transaction monitoring and other financial crime technology-related compliance systems requires staying close to your subject matter experts (SME). 

Special thanks to contributor: Steve Alsace.

Read Full In-Depth Feature: U.S.A

Companies should ensure they have a robust AML and sanctions compliance program in place, which includes appropriate risk assessments, documented policies, and procedures, as well as appointed officers in key roles. 

Salvatore LaScala, Partner & Global Investigations and Compliance Co-Lead

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