US regulators rouse banks to AML innovation
Five US agencies are using their collective might to encourage banks to get creative and be tech savvy for Bank Secrecy Act / anti-money laundering (BSA/AML) compliance obligations.
The Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency (OCC) want banks to strengthen the financial system against illicit financial activity.
In a nutshell they are encouraging banks to be more “innovative”. It’s OK for banks to engage with the private sector and other interested parties.
The agencies will not advocate a particular method or technology for banks to comply with BSA/AML requirements.
To try and be more open and supportive, the agencies say they welcome the use of artificial intelligence (AI) and pilot programmes. If the latter “prove unsuccessful”, the agencies “should not subject banks to supervisory criticism”.
I think you get the idea. It’s like a parent who’s finally realised the right way to be a parent. Most worked it out ages ago or have the common sense in the first place.
For example, when banks test or implement AI-based transaction monitoring systems and identify suspicious activity that would not otherwise have been identified under existing processes, the agencies “will not automatically assume that the banks’ existing processes are deficient”.
Other ideas include FinCEN to consider requests for exceptions and exemptions for the testing and potential use of new technologies.
FinCEN is launching an innovation initiative – such as “dedicated times for financial institutions, technology providers, and other firms involved in financial services innovations to discuss the implications of their products and services”.
In the spirit of this openness, the agencies also welcome industry’s feedback on how they can do better when it comes to advice and guidance.
I guess it’s over to the banks now and to see how they react to this inspiration and clear message of support.