How Technology Can Help Turn the War on Financial Crime and Money Laundering

  • Guðmundur Kristjánsson, Founder & CEO at Lucinity

  • 14.06.2021 04:15 pm
  • #security

In the global war against money laundering (ML), there can be no arguing that we’re currently fighting a losing battle. In April, British bank Natwest became the latest victim of the dark underworld of financial crime, joining a long list of global financial institutions that fell foul of money laundering.

Make no mistake, this is a global issue. Despite Natwest currently dominating the headlines, Danske Bank still continues to deal with the fallout of its 2018 scandal, while 2020/21 casualties, Westpac Bank and Capital One, both serve as stark reminders that this issue isn’t isolated to one single country or region. Combined with the fact that money-laundering fines have skyrocketed by 80% since 2019, as criminals exploit the uncertainty caused by the COVID-19 pandemic, and the outlook seems bleak.

Why are the criminals winning the financial crime fight?

One of the main reasons the global financial sector is struggling to defeat money-laundering criminals is the disjointed and disparate nature of current anti-money laundering (AML) systems and their incumbent technologies.

Current regulations and reporting frameworks seemingly reward financial institutions for ticking specific boxes and meeting arbitrary benchmarks, often based on rigid computer logic and supported by ageing legacy technology. While these rule-based systems are useful for identifying who a customer is, they fall short when determining exactly what that customer is doing – arguably the most critical component of ML detection.

One way in which forward-thinking banks are beginning to take the fight to money launderers is through wider and more sophisticated use of artificial intelligence (AI) and machine learning. This allows compliance teams to augment their approach to ML detection, gathering data, identifying patterns, and making astute observations based on an individual customer’s risk, instead of the rigid and inflexible rules that criminals find so easy to navigate.

Strength in numbers: Technology can’t conquer alone

That’s not to say that many banks and regulators aren’t trying. After all, it’s not as if they’re actively trying to make life easy for money launderers, but without increased collaboration between financial institutions and regulators, criminals are finding it easy to pick their victims off one by one.

We must acknowledge, as an industry, that money laundering is too big an issue to face alone. NatWest chairman Sir Howard Davies put it best at the bank’s recent annual meeting, stressing they “cannot tackle financial crime in isolation”. That’s why it’s so important we push technology to the frontline, as our chief weapon against money launderers. In doing so, it can also act as the critical bridge between banks and regulators across the world, giving us all a common battlefield on which to defeat financial criminals as one.

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