The AFC Investigator Revolution

Why FIs should act now

In April 1990 the Financial Action Taskforce (FATF) issued the 40 Recommendations: a comprehensive framework of measures  to counter financial crime. For the next three decades, the international community would rely on these recommendations to tackle money laundering and counter the financing of terrorism.   

30 years and 5 months later a consortia of media outlets released thousands of Suspicious Activity Reports (SARS) into the public domain.  Known as the “FinCEN Files”, these leaks exposed a range of serious deficiencies inherent in the global AML/CFT regime. They also led to the intensification of calls for reform from an outraged public and officials worldwide.  

What changes will FinCEN lead to?

The list of proposed changes are numerous, and include:

• Switching the focus of regulatory regimes from programmatic compliance to the endorsement of an intelligence-led and outcomes-driven anti-financial crime model.
• Enhanced intelligence sharing (eg. public-private, and private-private)
• Improved training for law enforcement agencies to better equip them to exploit financial intelligence and tackle economic crime.
• More transparent corporate registries. 

Before September 2020 numerous projects aiming to implement such solutions were underway around the world.  However, the FinCEN files have provided added stimulus to this reform agenda. There are clear signals that FIs should be ready to make changes to the way they work: 

• The UK Treasury Committee has announced an enquiry to examine what progress has been made by regulators and law enforcement in relation to preventing money laundering.  

• The EU has signalled its intention to introduce a range of sweeping reforms, including implementation of better coordination between FIUs.

• In late 2020 FinCEN requested comments from the public in relation to proposed changes to AML laws that are “intended to provide financial institutions greater flexibility in the allocation of resources and greater alignment of priorities across industry and government, resulting in the enhanced effectiveness and efficiency of anti-money laundering (AML) programs.” 

• And in Dec 2020 Congress passed a range of reforms to US AML laws which, if enacted, will represent the most significant set of reforms in decades. 

What is the predicted outcome of FinCEN?

Experienced anti-financial crime consultant Matthew Redhead agrees that within the banking industry a shift in attitude is well underway. As a result, the processes and technologies used to tackle AML risks are likely to come under close scrutiny. He argues that “The trend in AML is running strongly away from compliance-based processes, towards a more reflexive, responsive and agile approach.” 

Although there has long been discussion of change in the industry, the time to act is now. Next week we’ll be looking at how to choose the right technology to make these changes happen.