The sanctions landscape continues to evolve, presenting new challenges for regulators and compliance experts. Over the past year, AML and anti-financial crime experts have encountered a multitude of unexpected crises and emerging risks on a near daily basis. New challenges call for new solutions. To that end, last week the Napier team joined thought leaders from the public and private sectors as well as NGOs, for the annual ACAMS Hollywood conference. Packed with dynamic discussions and informative presentations from global experts, the conference featured seminars covering topics ranging from the future of sanctions regimes to finding the sweet spot between AI technology and human talent.
Here are my top five takeaways:
1. Sanctions: check what’s ahead and be prepared
While Russia’s invasion of Ukraine and the introduction of the subsequent sanctions regime may have caught many by surprise, the upside is that compliance teams now have a chance to reset and take a proactive approach to future sanctions.
Citi’s head of sanctions compliance, Angelique Roberts, argued that while Russia was a big test on banks and FIs over the last 12 months, now is a great time to take a step back and look at what might be coming.
The challenges presented have introduced a need to invest in better technology, so it's a good time to re-evaluate current systems. Is there sufficient automation? Can AI/ML enhancements be added? Most likely there will be more Russian sanctions and sanctions against China coming in future, so it is smart to avoid reactive postures to risks that we know are likely to transpire.
As Markus Schulz, ING’s FCC’s deputy global head and global head of change management cautioned, there will be a number of entities wanting access to sanctioned assets. He added that it would be unreasonable to expect transaction monitoring to identify sanctions evasion, commenting that we need intelligence wrapped around TM solutions to achieve optimum results.
Additionally, global legal disputes are on the horizon due to the current sanctions regime. Seized and forfeited assets are set to be the subject of complex legal actions across different jurisdictions applying conflicting laws.
2. Technology is getting more effective – but it needs to be strategy-led
Technology solutions are evolving at breakneck speed, but it’s important to ensure that there is an overarching strategy driving their introduction. Vendors must be able to demonstrate that they have a clear strategy, or risk building in bottlenecks that decelerate their clients’ cloud objectives.
Panellists spoke candidly on this, counselling that vendors that don’t have a robust and clear cloud strategy will become a bottleneck for their clients, potentially slowing down clients’ cloud goals.
It’s vital to work with vendors who understand, design and develop to regulatory requirements. For example, explainable AI is essential to demonstrate the underlying basis on which decisions are made and critical for gaining support of regulators.
3. Client Screening is ripe for innovation
Recognition of the breadth and spread of bad actors is making FIs acutely conscious of the risk of leaving gaps in their Client Screening solutions. The stage is set for the introduction of next generation technology in this area.
Barclays’ director of Americas head of sanctions and ABC, Heather Epstein argued that breaking down siloes, talking to the KYC team, understanding risk and what business the customer is in - defense, military, tobacco, firearms– is key.
Scotia Bank’s managing director and global head of sanctions and screening, Andrew Jensen, added that FIs should use data providers’ data and work with other tools to make best use of the information available. He urged compliance teams to use sanction controls to integrate other pieces of the fincrime puzzle, including negative news, investigations, and indictments, and to be aware of the abuses in the systems – for example, modern slavery and trafficking.
4. Good data will remove opacity in corruption
There is mounting pressure, stemming from an ambitious regulatory agenda, to ‘lift the veil’ on corporate shell structures and beneficial ownership.
Explaining the outlook for banking anti-financial crime officers, former US Treasury Department official and founder of Capitol Peak Strategies LLC, Alex Zerden found room for optimism. He asserted that we are living through a unique time to be in the industry, due to the fact that the nature of data holding is growing at an unprecedent rate, accelerating the amount of data available and the capability of data analytics.
5. Technology together with human talent will deliver optimum results
While technology provides useful automation, human expertise coupled with technology outputs is invaluable.
Mastercard Transaction Services chief compliance officer Luis Alvarez predicted that AI is going to play an increasing role in compliance, but it’s not going to take your job. It will simply make your work more interesting and likely ensure you’re not going to be working on mundane tasks.
Maersk’s chief compliance officer, Alexandra Belmonte reinforced the point when she explained that her team has an automated transaction monitoring process, but Russia has proved that there is more needed from personnel and intelligence on the ground to fine-tune the approach to managing risk.
“Often times, smugglers will pick peak shipping season and mix in with the most common commodity shipped. It’s like looking for a needle in a haystack” she said.
Irma Juarez, Americas risk management head, enterprise financial crimes compliance at U.S Bank agreed that a mixture of systems and human intelligence that can best assess reasonability of transactions is the ideal.
She advocated for the importance of getting information from customers and maintaining open dialogue with them. “Picking up the phone and having a customer conversation can provide extremely valuable context," she added.
Some final thoughts on ACAMS Hollywood
In conclusion, some fascinating insights, predictions and advice given by an extraordinary collection of experts from all sides of the fight against financial crime at ACAMS Hollywood, with a particular focus on where next for sanctions, the interplay between AI and human talent, and how technological innovation is set to better power compliance teams to fight financial crime the world over.
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