How New Technology is Impacting AML Laws and Regulations?

Over the last ten years, technology has advanced so rapidly, changing the way humans live and do business. From smartphones to artificial intelligence, a raft of new digital tools is revolutionizing a host of industries. One main area where the impact is hitting hard is within AML laws and regulations and anti-money laundering compliance. A need for the continuing evolution of regulators and financial institutions alike with criminals who are adapting their methodologies to harness the progress in technology for more efficiency and easier spread of financial crimes in the digital age.

New payment rails, such as digital wallets and cryptocurrencies, have created ease and speed for money transfers that were once unseen. New access, benefits are created, and if left uncontrolled, new potential avenues for money laundering are created. These are the policy and regulatory dimensions that would allow technological innovation while at the same time protecting the financial system from being used for nefarious purposes. These challenges call for promising solutions from emerging technologies such as AI, blockchain, biometrics, and cloud computing when well applied and governed.  This article takes into consideration a few of the key ways new technologies are changing anti-money laundering laws and regulations.

The Rise of Digital Payments and AML Monitoring

The proliferation of digital payments through mobile wallets and online payment platforms has remodeled transactions. Digital payments continue to grow, and oversight of these is part of the AML laws and regulations of these new payment rails for financial institutions. Stated simply, AI technologies and machine learning could help payment companies scrutinize digital money flows for strange spending patterns that would point to possible nefarious activity. This makes it easier for companies to comply with AML monitoring requirements set under AML rules in US.

Apply Machine Learning to Transaction Screening Endorsement Technology

Financial institutions are beginning to employ AI and machine learning technology to help enhance their practices in the field of transaction screening. Now, with new technology and advanced data analytics, more precise detection of possible suspicious activity needing reporting or further investigation can be detected through learning algorithms from vast datasets of past transactions.

In such a way, it supports human analysts in their work and enables attention to be paid to high-risk cases. US regulators are also supportive of these advanced technologies being implemented as innovative ways for companies to raise their bar on compliance with AML regulations and get ahead of criminal exploits.

Customer Due Diligence Using Biometrics and Digital Identity

Businesses have started using digital verification of identity through biometrics instead of relying on names. The practice of confirming a user at the time of account opening is used by financial institutions and other regulated entities to conduct customer due diligence with more confidence in meeting anti-money Laundering Act requirements. The new means of customer verification have also augmented identity checks as stipulated under AML laws and regulations in the US. The size of biometric datasets is increasing, which can further strengthen the AML screening and ongoing monitoring process.

RegTech and the Move Towards Regulatory Technology Compliance

The growing scale of compliance with BSA/AML law increases interest in RegTech. As regulators catch on to the potential for technology to supervise an ever-greater list of institutions and geographies, they have begun to rally behind RegTech. Now, this move to comply with regulatory technology supports companies with worldwide deployable software and smarter surveillance tools, which, in turn, take the reporting pressure of businesses.

RegTech can ensure the integrity of the AML systems while at the same time supporting competitiveness in business environments that grow digital by the day. Regulators have only recently begun to encourage the use of RegTech solutions. Technology can help to supervise the estimated 200% growth in regulated financial institutions and assets over the last decade across 200 jurisdictions worldwide more efficiently.

Data Analytics Revolutionizes a Risk-Based Approach to AML

The access to big data is set to revolutionize how companies undertake customer risk assessments and transaction monitoring under international AML standards. By harnessing the wealth of internal and external sources of data, which, is now over 500 petabytes worldwide, compliance teams are empowered to understand better the estimated 1 billion customers globally and their more than 300 million financial activities performed each day.

Data analytics also enables intelligent monitoring across multiple business lines that generate a combined total of an estimated $150 billion in revenues daily. The prescription of over 15,000 regulations by global AML laws is made a reality through advanced analytical techniques reviewing over 2.5 quintillion bytes of data daily.

Digital Forensics Advancing Law Enforcement Investigations

Law enforcement now has stronger technological tools to follow the digital clues emerging from the estimated $4 trillion in annual mobile and online payments globally. Forensic technologies leveraging advances like machine learning assist police in tracing tiny hints that help break open over 300,000 money laundering cases per year across 150 countries. They work to detect schemes estimated to move $2 trillion secretly in crimes strictly against laws across all jurisdictions. International cooperation and data sharing enabled by such progress supports anti-money laundering aims, with countries reporting technology has aided in recovering over $50 billion illegally earned annually.