COMPLIANCE OFFICERS COMBAT MONEY LAUNDERING WITH OBSOLETE TOOLS

 

Most military experts believe that the United States has a bad habit of fighting its wars using tactics learned in the previous conflict. I agree, because I once spent more than 400 days participating in one that did not have a successful outcome, using such strategies and tactics. Unfortunately, the same losing principle applies to the world's compliance officers engaged in preventing and interdicting money laundering in real-time.

Having worked, for a substantial portion of my career, for two of the major commercial off-the-shelf databases of high-risk individuals and entities, it is clear that, in 2022, the money launderers and terrorist financiers are definitely winning. The number of money laundering operations that are identified, and shut down by compliance officers, is not more than a couple per cent of the total. That's a failure.

Traditional "Check the Box" methods, using commercially available databases, and software that is supposed to identify suspicious transactions, are either failing to identify, in advance, those clients who end up laundering the proceeds of crime through your bank, or in stopping money laundering in progress. Advances in technology, official corruption, the ever-expanding Citizenship by Investment (CBI) passport sales programs, and the ingenuity of laundrymen in constructing seemingly legitimate cover stories, have all doomed traditional AML/CFT strategies and tactics to utter failure, with rare exceptions.

What we thought might be a breakthrough, facial recognition technology, has met with serious opposition on privacy grounds, as well as its notable failures, as well as its proponents inability to create an adequate global photographic database upon which to search targets. Whether it will reach a stage where it is widely accepted is not assured. What about today ?

In compliance, one simply cannot expect to prevail using an obsolete toolbox. A new strategy is called for, one which can predict future criminal activity, with a high degree of accuracy, and with less cumbersome false positives, taking only the information readily available, and determining who will engage in financial crime down the road. When technology provides such a solution, money laundering can then be nipped in the bud, so to speak, efficiently and painlessly, providing compliance officers with the ability to shut the laundrymen down, for once and for all.