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The next evolution of financial crime detection: A recap from ACAMS Las Vegas

25
Oct
2019
Quantexa

With support from regulators, banks begin to shift toward the next evolution of financial crime detection. At ACAMS Las Vegas, industry experts discussed the key trends shaping AML transformation. Innovation continues to guide financial institutions striving for greater efficiency and effectiveness in the fight against financial crime. 

Earlier this month at ACAMS’ 18th Annual AML & Financial Crime Conference, Quantexa’s Head of U.S. Financial Crime, Richard Stocks, spoke alongside industry experts from Accenture and Mizuho Bank on the key trends shaping the evolution of financial crime detection and prevention. These included access to technology and new ways to cull and analyze data continue to redefine what’s possible.  

Philippe Guiral, head of financial crime for North America at Accentureexplained how the financial services industry is moving away from manual investigations and siloed, disconnected datatowards a holistic view of the ecosystem view. Companies can achieve this by maximizing the value of internal and external data and leveraging new detection techniques to improve the efficiency and effectiveness of AML functions.  

Guiral noted there are several functions and key activities that are working together to achieve this level of financial crime detection and transformation including advanced analyticsmachine learning, cloud-based functions, and intelligent automation. In conjunction, these components will drive three key benefits for organizations 

  1. The improvement of the customer experience 
  2. the improvement of the quality and efficiency of the investigation process 
  3. the enablement of better controls within financial crime systems 

However, as with any innovation, financial institutions find themselves up against a few challenges as they aim to advance their processes. Eric Kaplan, head of financial crimes compliance at Mizuho Bank, pointed to three key themes to keep in mind during innovation from a financial institution’s perspective: 

1. The innovation guidance from the regulators

The joint statement on innovative efforts to combat money laundering and terrorist financing released in 2018 signaled a shift towards more prudential supervision of the industry. The mandate affects all firms regardless of the current state of their programs. If they are under corrective action and have had significant criticism from regulators, there is a real imperative for them to look at next-generation technologies to enhance their program. On the other hand, even if a firm has a clean program and a good track record, they still need to keep up with the market. 

2. The use cases that are being solved industry-wide

There are now regulatory mandates, or at least guidance, to innovate, so what use cases should the industry think about solving? According to Kaplan, false-positive reductions is a prime one. Firms spend a huge amount of time and human resources on financial crime detection and there is currently little benefit due to the high number of false-positives alerts. Focusing on reducing false positives fits squarely into what the guidance is advocating for in terms of employing resources better and using technology to that end. 

3. How financial institutions make the right technology decisions

When it comes to deciding who the right vendor is and how to move forward as a firm, the key question you should ask is: what problems are you solvingYou need to be purposeful and have a clear problem statement before you engage in the process or start evaluating vendorsYou also need to understand what it is you’re trying to achieve and not just engage in tech for tech’s sake.  

With all of this in mind, banks are tasked with finding the right technology, which is no easy feat. Richard Stocks explained how organizations can apply technology to solve the problems that will arise as they transform their AML models to be more efficient and effective. He advised the most important factor will be the ability to identify parties from across all the various data sources – CRM systems, KYC systems, buyer metric data, transaction data, filed SARs and so on – that exist today 

With data in silos, there is critical information buried within multiple sources, fields and documents. When analyzed holistically and dynamically, organizations can successfully identify a single view of an individual, businesses or entity partiesOnce that’s been done, you can build context by expanding the network of connections to understand other relationships that may exist. By connecting the dots across the vast numbers of data points and entities, you can accurately identify bad actors within the network and spot potentially criminal activity.  

When it comes to implementing the technology, Stocks said that often organizations tend to build for one use case only, which is typically the “squeakiest wheel. To avoid this, he encourages organizations to look outside the AML domain to see how other functions such as KYC or customer acquisition can benefit from the same capabilities.  

5 key takeaways from our ACAMS Las Vegas panel 

  1. The transformation in AML is happening now and the fact that regulators are supporting it is crucial to its evolution 
  2. Innovation will continue to guide financial institutions as they to strive for greater efficiency and effectiveness in their efforts to fight financial crime 
  3. There is no silver bullet to solve the AML challenges that currently exist, but the industry can’t get stuck in the status quo and needs to move forward as a unit 
  4. There are proven techniques, like entity resolution and network analytics, that are already solving problems todayAs you look to new vendors, think about how these techniques can suit your needs. 
  5. The disruptive evolution is not something institutions can ignorethe best approach is to embrace it. 

Ready to begin innovation at your institution? Book a demo here to learn more about Quantexas financial crime solutions. 

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