The AFC Investigator Revolution: why FIs should act now

By Rebecca Lindley

document management feature

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 form the basis for laws and policies designed 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, and led to the intensification of calls for reform from an outraged public and public officials worldwide.  

The list of proposed changes are numerous – switching the focus of regulatory regimes from the assessment of programmatic compliance to the endorsement of an intelligence-led and outcomes-driven anti-financial crime model, to enhanced intelligence sharing (eg. public-private, and private-private), to the need for law enforcement agencies to be better-trained and equipped to exploit financial intelligence and tackle economic crime, to more transparent corporate registries. And prior to September 2020 numerous projects, which aimed to implement the solutions proposed above, were underway all around the world to a greater or lesser extent.  

However, the FinCEN files appear to have provided added stimulus to this reform agenda and 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. 

Experienced anti-financial crime consultant Matthew Redhead agrees that within the banking industry a shift in attitude is well underway, and as a result, the processes and technologies that have been 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.