The Role of Emerging Technologies in Anti-Money Laundering
A focus on Anti-Money Laundering (AML) is vital to ensure financial compliance for accountants. But how do you ensure that you’re doing it right?
While some accountancy firms are still relying, in some way, on manual processes, the vast majority are making use of AML technology in some form to keep them compliant. As in every industry, AML technology is constantly evolving, helping accountants to perform AML-related tasks more accurately, efficiently and effectively.
Technological advancements like Artificial intelligence (AI), machine learning (ML) and Blockchain are making AML even easier. Read on for an overview of current AML challenges, how technology is changing things, and what we can expect in the future.
Current AML Challenges
AML compliance has historically had many challenges. Even with AML software in place, accountants have had to utilise manual processes and refer back to paperwork to complete their AML checks.
Verification processes are laborious – and extensive. Mistakes are far too easy to make. AML checks are time-consuming and require significant resource.
What’s more, the techniques and tools used by financial criminals are becoming ever more advanced and complex, making compliance a greater challenge than ever before.
The solution could well lie in newer technologies that are now being used in the Anti-Money Laundering space.
AI and ML in AML
Artificial intelligence (AI) and machine learning (ML) are revolutionising AML technology, helping accountants to combat the increasing sophistication of financial crime.
Machine learning is being used by financial institutions to improve the transaction monitoring element of AML programmes. ML uses algorithms to pick up on patterns that have historically been associated with money laundering activity. This replaces rule-based systems, which might miss certain activities because they do not fall under pre-defined rules.
Artificial intelligence (AI), meanwhile, can continuously monitor transactions and flag any unusual patterns in activity. It can also be used for automated, more routine tasks, such as those associated with customer onboarding.
Both ML and AI in AML clearly have their benefits, but they also have their challenges. Accountants with little or no exposure to these technologies may struggle to implement them without external support, or may be unwilling or unable to invest financially in such solutions.
However, the benefits of using AI and ML in Anti-Money Laundering clearly outweigh these challenges.
Blockchain’s Impact on AML
Blockchain is a shared ledger with records that cannot be altered. Distributed digitally and decentralised, it allows for records to be tracked and information to be shared in a secure, transparent and immutable way.
When used as an AML technology, blockchain makes it easier to validate transactions and ensures full traceability of funds. It creates a data-rich transaction history that can be viewed by all ledger readers, with notifications given immediately any new transactions occur.
What’s more, all blockchain transactions are monitored by algorithms that can help to detect fraud. For accountants, blockchain technology can aid with compliance, reduce the time and amount of manual labour required for AML processes, and monitors not just entry and exit points, but also analysis of the overall system for a holistic view of the data you hold.
Future Trends
As digital technology continues to evolve, financial criminals will have more and more tools at their fingertips. While this means that preventing money laundering will become more complex, there is also great potential for new AML technology to make the task easier.
In addition to increased use of blockchain, ML and AI in AML, big data is likely to have a larger role to play in the future. Using advanced data analytics, it could enable real-time data processing, meaning you can tackle any threats more quickly. Larger data sets will also mean more comprehensive risk assessments, helping you to stay compliant.
Could biometrics also make a difference? Digital identity technologies such as these could improve identity verification, making it more secure as well as less intrusive.
As our clients continue to become more globalised, could we also see more cross-border collaboration? While rules and regulations vary from nation to nation, it’s possible that the increased globalisation of business could result in the development of more international technologies to share intelligence and collaborate against threats across borders.
Why Choose ICPA for AML Compliance
We understand the importance of keeping up-to-date with AML technology. It’s a field that is constantly developing to handle a range of ever more sophisticated threats, and our aim is to help our members stay in the loop.
Through our extensive catalogue of industry events, guides and resources – as well as our expertly-staffed telephone helplines – ICPA members can enjoy plenty of support to keep them up-to-date with AML technology.
ICPA members also benefit from access to AMLCC, an all-in-one solution for online compliance and risk management. You can learn more about ICPA membership benefits
With our world becoming ever more digital and the techniques used by financial criminals becoming ever more complex, it is clear that technology has a significant role to play in combating money laundering activity. There already exists a great deal of technology to help accountants to navigate their way through this complex territory, but additional developments continue to be made.
Artificial intelligence, blockchain and machine learning are aiding in the fight against financial crime, while things like big data and biometrics could well facilitate AML activity in the future: streamlining processes, improving efficiency and accuracy, and protecting accountants in an increasingly digitalised world.
FAQs
What are the current challenges in traditional AML methods?
Traditional AML methods are often manual. This can be time-consuming and prone to error, as well as less effective in identifying money laundering techniques that are becoming ever more complex.
Can emerging technologies completely replace traditional AML methods?
We believe that, while emerging technologies enhance existing AML efforts, the best approach is a combination of both new methods and traditional AML techniques.
What are the challenges of implementing AI and ML in AML?
AI and ML require both high-quality and extensive data in order to work. Algorithms can potentially be biased, while there is also a need for ongoing training and validation of AI and ML models.
How does AI identify suspicious patterns in financial transactions?
Using advanced algorithms, AI can detect any patterns and anomalies that deviate from normal behaviour. This flags potential money laundering activities for further investigation.
What role does blockchain play in increasing transparency in financial transactions?
As it is decentralised and immutable, blockchain ensures that every transaction is recorded and monitored in real-time, providing a clear audit trail.
How does ICPA support AML compliance for financial institutions?
ICPA members have access to a wide range of tools and resources to help them meet AML requirements. These include guides, training resources and expertly-staffed phone lines, as well as access to AML technology that includes advanced AI and blockchain solutions.
Contact ICPA today to learn more about AML compliance.
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