ACAMS Las Vegas was held last week and provided a lot of great insights and strategic thinking around financial crime fighting and related regulatory compliance for the BFS industry. We found that the most significant takeaways arose from four areas:
- Addressing human trafficking
- The CTA and Beneficial Ownership Registry
- Ongoing Russia-related challenges
- FIs’ need for knowledge and comfort with AI
Mariah Gause, CAMS, Interim CEO and Chief Operating Officer at ACAMS, stated that this is a time of significant transformation for the anti-financial crime community and that we must do whatever we can to prevent the flow of illicit funds that fuel so much criminal activity around the world.
Addressing human trafficking
Attendees learned how both large and small financial institutions (FIs) can more proactively investigate human trafficking by adjusting their transaction monitoring (TM) controls to identify related red flags. These show up in various types of financial transactions, such as those that have:
- Inconsistency with the customer’s line of business
- Activity at abnormal hours and/or in several jurisdictions
- Excessive use of prepaid cards or cash apps
- Conversion of cryptocurrency to fiat currency or vice-versa
Attendees of the ACAMS conference heard about a single case study which served as the basis for describing 16 red flags of human trafficking.
To understand the issue in some detail, it’s easy to get grounded in the reality and scope of it today. The International Labor Organization (ilo.org) issued this new report that defines and delves into modern slavery. You can also read The 2023 Global Slavery Index report by WalkFree.org. Not only does it provide country-specific prevalence data, definitions of modern slavery, and the drivers behind it, readers also end up with an understanding of how western nations contribute to modern slavery and trafficking.
The CTA and Beneficial Ownership Registry
There was quite the compelling discussion around the AMLA (Anti-Money Laundering Act) and the CTA (Corporate Transparency Act) – particularly regarding the upcoming launch of FinCen’s US Corporate Beneficial Ownership Registry. Not only did several panelists express their doubts that banks will benefit from the registry, US Senators have also recently expressed their concerns about how the registry can even work effectively.
During a panel discussion at ACAMS Las Vegas, Daniel Stipano, counsel with Davis Polk in Washington, D.C. and former deputy chief counsel for the Office of the Comptroller of the Currency, said that exemptions to the beneficial ownership reporting rule and the absence of a plan for verifying the accuracy of submitted information threaten to undermine the registry database. He stated, “If I’m in the money laundering business, I think [the reporting rule] gives me a pretty good road map if I don’t want to report beneficial ownership. Frankly, I wonder why any financial institution would want to access it.”
FinCEN Director Andrea Gacki seemed to partially address Stipano’s concern the next day in a keynote address. Gacki said that, while not possible initially, verification of submitted information constitutes a long-term objective for the bureau.
The main concern expressed in a bi-partisan letter from a group of Senators – Sheldon Whitehouse, Chuck Grassley, Ron Wyden, Marco Rubio, and Elizabeth Warren – is that FinCen lacks the technological plan and automation to ensure the registry is usable by financial institutions. The letter states, “As drafted, this proposed rule risks impeding financial institutions’ timely access to the beneficial ownership directory. Once the database is live, financial institutions across the country will immediately begin requesting access to BOI for the 32 million reporting companies in the country. It is essential that FinCEN establish an automated process (ideally one that integrates with existing compliance systems at financial institutions) for fielding and responding to these requests.”
The letter adds: “If FinCEN manually reviews every request from each financial institution, it risks overwhelming the capacity of the agency, generating major delays in the financial system, and undermining the utility of the directory.”
Ongoing Russia-related challenges
A panel of experts informed ACAMS Las Vegas attendees that the Russian mercenary organization Wagner Group (blacklisted by the US), will remain operational despite the death of its leader Yevgeny Prigozhin and that FIs must stay vigilant regarding all its shell companies. “There are hundreds of shell companies associated with Wagner, some that are designated but many that are not,” said Justyna Gudzowska, senior advisor at The Sentry. “Treasury may not be able to act on it [immediately], but you can. Do your horizon scanning, get information from as many sources as you can.”
In Monday’s keynote address, Elizabeth Rosenberg, assistant secretary of terrorist financing and financial crimes at the U.S. Treasury Department, communicated that she finds Russia’s development of a digital currency to be not significant at this time. “I believe we have an enormous amount of work to do with fiat currency, including the dollar, so this is the first order of challenges we really need to dig into,” she said. “…Right now, our immediate work has to do with fiat currency and highly convertibly hard currencies.”
FIs’ need for knowledge and comfort with AI
Approximately 1 in 4 respondents to a Monday poll at ACAMS Vegas indicated that they or their organizations have “no appetite” for using artificial intelligence to investigate potentially illicit transactions. One respondent, Carolyn Anderson, a senior manager at BMO Financial Group, said that the shunning of AI is due to a lack of familiarity by compliance teams. “We don’t know what we don’t know,” said Anderson. “It’s very easy for us to stick with what has worked for us in the past.”
Of course, AI Digital Workers are exactly the type of AI that FIs can leverage to streamline their battle against increasingly sophisticated methods of obfuscation used by criminal actors. By arming AML compliance teams with AI that can alleviate the tedious work and reduce alert fatigue, compliance teams are then able to focus on higher-value work and deeper investigations to catch the bad actors. A panel discussion led by Grant Vickers, Head of Financial Crimes Strategy at WorkFusion, focused on how new technologies (not just AI) can help regulators, supervisors and regulated entities overcome AML/CFT challenges. The good news is that the technology exists to bring automation into AML and Sanctions compliance programs, and now more than ever, regulators want FIs to innovate and look for new ways to perform these old processes.
To understand the areas where technology can help, read this blog post about Five AML compliance issues that are ripe for innovation.
For more in-depth understanding of how AI specifically can help, read this post: Overcoming AML Transaction Monitoring Challenges with AI | WorkFusion
We found ACAMS Las Vegas both compelling and informative, and we hope to see you at an ACAMS event soon!