AI is just one of a number of technologies that could revolutionise operational anti-financial crime (AFC) processes but is still under-used, says Thomas Seidel, senior manager AFC and compliance at Sopra Steria Germany.
The opportunities for the use of new technologies, automation, machine learning, AI and now GenAI have been touted for years at the relevant symposiums and conferences across industry. The expectations are enormous and the promises regarding cost efficiency and automation of regulatory requirements are even greater.
Yet in reality, in operational anti-financial crime (AFC) processes, little of this has arrived to date. While neobanks and fintechs in particular have smart and digital business models, operational AFC processes in many institutions - both traditional and new financial institutions in Germany - are still manual and “classic” in nature.
Of course, there are pilot projects and specific use cases. But there can be no talk of a comprehensive, holistic, technology-driven compliance approach. The narrative that new technologies can be used to implement full compliance 2.0, which guarantees both high cost efficiency and greater effectiveness in combating money laundering, remains (so far) what it is – a narrative.
This is where the “Why is that?” must come in. I want to focus less on data and technology. Others can do that better. Yes, technological and infrastructural hurdles in the integration of AI systems are complex and costly. Large amounts of high-quality data are missing because they are fragmented and incomplete in outdated systems and it takes enormous effort to clean them up and make them available in high quality.
On the other hand, the technology is there, the providers and ventures are there and the pressure to act and suitable use cases are all the more present. So what's the problem, why is tech still catching on so little?
One popular explanation is the lack of willingness and understanding on the part of the German banking supervisory authority BaFin. Regulators and regulatory bodies would not allow existing systems and processes to really be changed. I think that's a big myth that's great to hide behind in order to stick to established processes and organisations.
More dialogue about new approaches is needed
I remember a BaFin employee saying: "I know what some people think about us. But it's not exactly the case that an institution comes to us every day to present us with a coherent, sustainable overall concept based on digitalisation and technology that is compliant with the requirements of the AMLA (Anti-Money Laundering Authority)."
I believe she is making a very important point here. We need more creativity and responsibility to question comfortable and reliable rules, to develop technologically supported alternatives and to use these approaches to enter into a proactive and intensive dialogue with the state authorities. Moreover, industry actors must resist the temptation to remain in their comfort zones, refraining from pre-emptively assuming regulatory scepticism. Such presumptions risk stifling innovation and discouraging the pursuit of novel approaches and constructive dialogue.
There are Sopra Steria clients who are taking this approach, and they speak of an open, appreciative and solution-oriented exchange, including with the supervisory authorities. And the more these situations and use cases exist that lead to a dialogue between obligated companies and state actors – the much-cited public-private partnerships – the more likely it is that anti-money laundering technologies will become established.
Unfortunately, start-ups in the field of anti-financial crime can also tell you a thing or two about how difficult it still is for them to find their way into existing structures, applications, purchasing processes, established suppliers, etc – despite state-of-the-art technologies and effective, efficient (and cost-efficient) use cases. Here, too, more courage is needed on the part of the market.
Of course, state actors can also make a better contribution by creating a space in which responsible innovations can be tried out and a use case-specific dialogue between the state, the financial sector and fintech start-ups is possible. Or by defining data formats and structures to which the industry can align itself and, for example, further automate suspicious activity reporting processes.
The ball is in the financial sector's court
I believe that the impetus must come from the obligated companies and lead to a discussion with government agencies. These in turn must provide a better framework in which this beneficial dialogue can take place.
Why not, for example, commission a specific working group within the Anti-Financial Crime Alliance (AFCA) to examine the automation of the suspicious activity reporting process and develop recommendations for an industry standard? There are enough concrete solutions.