INTERPRETING AI WILL REQUIRE A NEW BREED OF COMPLIANCE OFFICER

While the media is engaged in a love affair with Chat-GPT, and its brethren, and Fortune magazine boldly extols the potential KYC benefits of artificial intelligence, bank executives appear to be missing one important point: money launderers and financial criminals have access to the same technology that compliance is now adopting. Consider that laundrymen, who historically are usually technologically years ahead of most banks (I know this from personal experience) most likely are using AI/ML to test their methods and tactics, and as the result tweaking them to fool compliance. I first reported on the benefits of AI on my blog six years ago; rest assured that the criminal community was paying attention.

I can assure you, knowing the mind-set of your typical financial professional whose public occupation fronts for his covert money laundering operation, that the new breed of laundryman will have modified his mode of operation to create a pipeline that only displays unstructured data, unconnected to any known technique that compliance can recognize. Laundrymen, like the Marines, adapt and innovate, for the purposes of making even the AI-recovered data hard to understand as financial crime.

O.K., what does compliance do, in response to an AI/ML-equipped opponent, hell bent on building opaque operations? The solution is to teach compliance officers in a new manner:

(1) Give them a thorough background on ALL money laundering techniques that have been employed during the past 75 years. Many new methods are simply modifications of what has gone before, with sufficient alterations so as to make them unintelligible today. To my knowledge, no major international bank teaches all the strategies and tactics, which I believe to be a fundamental error in judgment.

(2) Teach them how to efficiently and effectively use the artificial intelligence-enabled platforms to mine the Internet, databases, public records, non-public resources and other sources, so that they yield their full potential, and display the results they need to identify, or rule out, financial crime, with a high degree of certainty.

(3) Take a page from how attorneys are trained in law school, learning Issue Perception, which is a learned skill where the participant can extract the central issues from the facts at hand. Compliance officers need to be analytical to spot financial crime.Train them by using actual case studies, like the casebook method used in law school, to cull out money laundering when they see it.

I realize that this is a tall request, but given the 95-97% failure rate in the identification and real-time interdiction of money laundering that we face every day, you really have no choice, of you want to stop the laundryman cold in his tracks.

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