US regulators push for new technology to tackle financial crime

US regulators push for new technology to tackle financial crime

US regulators have promised not to penalise banks that use artificial intelligence tools to spot gaps in existing anti-money laundering programmes, paving the way for the use of new technologies to tackle illicit financial activity.

The Federal Reserve Board along with four other regulatory agencies - the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency - say they want depository institutions to explore innovative approaches to both meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations and to further strengthen the financial system against illicit financial activity.

To this end, the regulatory bodies have committed to establish projects or offices as central points of contact for liaison with banks and technology vendors over the introduction of new technology.

Regulated institutions have so far been wary of trialing new technology to unearth financial crime for fear of exposing gaps in AML processes that would bring the wrath of the rule makers.

Recognising the sticking point, the regulators state: "Pilot programmes undertaken by banks, in conjunction with existing BSA/AML processes, are an important means of testing and validating the effectiveness of innovative approaches. While the Agencies may provide feedback, pilot programmes in and of themselves should not subject banks to supervisory criticism even if the pilot programmes ultimately prove unsuccessful. Likewise, pilot programmes that expose gaps in a BSA/AML compliance programme will not necessarily result in supervisory action with respect to that programme. For example, when banks test or implement artificial intelligence-based transaction monitoring systems and identify suspicious activity that would not otherwise have been identified under existing processes, the Agencies will not automatically assume that the banks’ existing processes are deficient."

In these instances, the regulatory bodies say they will assess the adequacy of banks’ existing suspicious activity monitoring processes independent of the results of the pilot programme.

"Further, the implementation of innovative approaches in banks’ BSA/AML compliance programmes will not result in additional regulatory expectations."

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