Is ROI Becoming ‘The New Black’ in the Fight Against the Black Economy?
As 600 AML professionals gathered in Stockholm for two days to showcase new systems, best practices, it was clear the financial industry is at a stage where development needs to happen faster than ever before. Automization, the ability to source better quality data through ML and AI is one most AML -professionals agenda. Yet, AML programs are still hampered by old inherent challenges causing performance to lag.
The agenda this year was a greater attention to organized and welfare crime, the new sanctions landscape, technology developments and efficiency. Beyond the macro developments, several sessions were dedicated to scenario and model validations, integration of key processes and measuring outcomes. The ambition must be to stay the step ahead of financial crime.
Economic and organized crime is a structural problem in Sweden according to several speakers. The chasm between the realities of the black economy and current AML-programs must be crossed. This is part of the whole check-box compliance discourse. The bottom-line is impact and performance of all AML processes and routines applied.
While significant investments are made into increasingly more sophisticated systems, it remains that only 1% of money laundering is stopped. With the new AML package and better guidance and understanding on AML risk factors, financial institutes are encouraged to focus more on processes, a workable risk-based approach and achieving results.
Several speakers talked about transforming systems in the context of automation and data management, achieving a holistic and risk-based approach, enabling effectiveness to meet efficiency.
One way of achieving this is to understand the real incentives and drives for AML performance – future-proofing expected delivery and economic viability. The ability to link enterprise-wide risk assessment, KYC, transaction monitoring and credit risk will be key. Moreover, AML could gain a lot from sharing data from the credit risk process.
Dealing with IT legacy systems is a critical concern to many organizations. Adaptations and additions are plenty but is not a sustainable strategy to address needs. Unless organizations are willing to take the short-term economic cost for a necessary overhaul, chances are that companies will remain with 85-90% false positives and weak conversion rates.
Management has a logical interest to understand what their AML costs per customer is.
If AML performance and investment decisions would be addressed in terms of ROI and output similarly to what is practice in the context of credit risk, chances are that incentives would become much clearer. In our presentation, we talked about for example the cost of underperforming TM-systems. This would be challenged in any other field of business operation, and it is not acceptable if companies want their AML program to perform
Lars von Ehrenheim, Director, Financial Crime Prevention
The interest in AI and ChatGPT is tremendous, but fundamentals to leverage the potential must be assured in the first place. The shift from manual processes to increased automatization is picking up pace. This will both require and enable organizations to focus more on data quality assurance.
In doing so, organizations will need to bridge the divide between compliance and tech. A success factor will be to ensure interdisciplinary capabilities with key compliance expertise working much more integrated with tech development.
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FCG is a proud member of the program committee for Penningtvättsdagarna and we look forward to being part of the work that will now continue.