Emerging Trends in AML That Affect Compliance Managers

Adoption of Technology Is Changing How Compliance Managers Work

The role of compliance managers is changing. As COVID-19 gripped the world in 2020, so, too, did digitalization. The adoption of technology in all businesses has accelerated – throwing up many challenges to compliance and regulation.

In this article, we highlight six emerging trends that are affecting compliance managers.

1.    The Use of Smart ID Verification in KYC

KYC has extended the need to identify vendors, contractors, partners, and customers for AML purposes, and it is no longer a tick-box exercise. Smart tech enables more comprehensive KYC with functionality such as facial recognition, NLP, OCR, and forensic scans for digital identification and verification.

The IDV process will become faster, more accurate, and less labour-intensive. Eventually, the need for manual intervention could be eliminated, as KYC data collection and analysis becomes fully automated.

2.    The Rise of COVID-19-Related Financial Crime

Fraud, exploitation, and cybercrime has flourished during the pandemic. As people have become more dependent on digital communication, banking, and shopping, crimes such as money mule schemes (using people to transfer money illegally) have become more prevalent. The number of phishing scams, malware distributions, and ransomware crimes has also escalated.

Compliance managers must use technology to help them identify, monitor, and track cybercrime and become more adept at spotting potential patterns of cyberattack.

3.    Use of AI Defence

With the emergence of online financial services and cryptocurrencies, cybercriminals have invested in AI technologies to commit money laundering, fraud, illegal transfers, etc. They are becoming adept at abusing facial recognition systems, operating just below alerts thresholds, and using voice cloning to avoid detection.

Compliance managers will need to adapt to these types of tactics, using AI defence technology intelligently. They should become more involved in the needs of the business, helping senior managers to identify risks, and suggesting improvements that should be made.

4.    Automation in Compliance

As the use of technology increases, there will be many areas of compliance and financial crime that are affected. Data storage, management, and analysis will be accelerated by using AI technology. Compliance managers will do less manual work, but will be required to become more involved in analysis and interpretation work.

5.    Greater Collaboration Between Public and Private Sectors

The isolationist approach to financial regulation is coming to a rapid close. We can expect greater collaboration between firms in the private sector and between the private sector and public bodies. This will help remove the roadblocks that exist between regulatory bodies and crime agencies in different countries, as a dovetailed approach to AML is developed.

In this context, compliance managers will find themselves working more collaboratively with outside agencies. Policies will need to be revised, especially in the areas of data privacy where regulations like GDPR restrict the sharing of customer data without consent.

6.    Real-Time Due Diligence

Periodic customer reviews to determine risk ratings have been the norm in the last 10 years. Using AI technology, it is becoming possible to conduct real-time reviews with customer data monitored dynamically and linking to specific events. Data from internal or external sources can be used to ensure that customer risk profiles are reviewed and kept current.

In such an environment, while AI technology will be key to monitoring events and reviews, it is likely that compliance managers will need to use a common-sense approach to such reviews. They may need to work more closely with financial advisors, helping them to determine the correct approach to customer reviews and to ensure no mis-selling takes place.

Acceleration of Tech in AML Is Accelerating Change for Compliance Managers

Running through all six trends is the acceleration of technology in the compliance and regulatory role. With cybercriminals adopting new technologies to perpetrate crime and avoid detection, digitalization is key to the changing role of the compliance manager.

Technology is enabling real-time monitoring, immediate IDV, and greater collaboration between private companies and public bodies. While compliance managers will be required to do less manual work (such as data input), they will be required to work differently – internally and externally – to maintain and improve the safety of consumers and protection of the financial system against money laundering and other financial crime.

At JCW Resourcing, we specialise in providing the full range of consultation and staffing solutions in the fields of compliance and financial crime regulation. To discuss your requirements, contact JCW Resourcing.