Anti-money-laundering innovations and evolving financial crime risks: The future of compliance

| Commentary

The 26th Annual International AML1 and Anti-Financial Crime Conference of the Association of Certified Anti-Money Laundering Specialists (ACAMS) concluded on March 23. Hundreds of industry experts from financial institutions, law enforcement agencies, and regulatory bodies gathered to hear from thought leaders and to share best practices on managing and mitigating old and new risks.

From new regulations to geopolitical crisis to digital disruption, new technologies are rapidly reshaping how compliance is practiced and how financial crime is detected and prevented. The following is a summary of the conference. Several emerging themes can help organizations build strong institutional resilience in the present and future.

Bob Bartels, external-relations manager of McKinsey’s Risk & Resilience Practice, interviewed McKinsey partner Olivia Conjeaud, senior advisers Marilu Jimenez and Peter Wild, and associate partner Scott Werner about the state of the industry in AML and financial-crime risk.

Bob Bartels: What word would you use to describe what was discussed during the ACAMS conference?

Olivia Conjeaud: Innovation. I have heard different people and different opinions on the level of innovation that can actually be implemented. Compliance leaders are asking, “What’s possible and what will actually help in risk management activities?” The key is the sharing of best practices and information across the AML and antifinancial-crime industry—including what innovation can do for the industry and how to get there in a practical way.

Marilu Jimenez: Digital. This is something compliance officers are trying to understand. They are eager to understand the challenges and opportunities and how to manage digital assets.

Peter Wild: History. We are in a unique situation with current geopolitical risk. The degree of global collaboration taking place is unprecedented. I don’t think the compliance world has ever been so prominent.

Scott Werner: Collaboration and, to elaborate, productive collaboration. We are seeing this among regulators, law enforcement, and financial institutions. The entire ecosystem is working together to address challenges that have always been there, but now new risks in the geopolitical and digital-assets space are accelerating constructive dialogue between these parties.

Bob Bartels: How would you describe the current state of the AML and financial-crime industry?

Olivia Conjeaud: There is definitely much progress and much still to accomplish. Some organizations are still relatively basic in their processes like Know Your Customer [KYC] and alert reviews, with many false positives and significant time, resources, and costs spent on low-risk–reducing activities. There is progression and the desire to innovate as it relates to efficiency and focusing on high-risk–reducing activities. At the same time, firms also need to rapidly adapt to a changing environment and its impact on them, like the growing presence of digital assets.

Marilu Jimenez: It’s a very challenging time for compliance organizations. Compliance professionals must continue to evolve, and those that remain static will see increased pressure to innovate. Regulation is increasing to address existing risks, with an eye on quickly addressing rising new risks, such as digital assets, sanctions, et cetera.

Peter Wild: The industry is in a difficult situation, with new technologies and an influx in digital currencies. As a result of the AML Act, which was passed in early 2021, we are waiting for the FinCEN2 financial-intelligence unit to develop the regulations which will define compliance. And while all of this is happening, there is continued development in new technologies which are designed to help.

Scott Werner: We’re seeing an evolution from a compliance mindset to a risk management mindset, and this is leading to more sophistication in the AML and antifinancial crime industry. Compliance leaders are looking at financial crime as risk, not just a “check the box” compliance activity to appeal to auditors or regulators. When the industry moves in this direction, the entire ecosystem—for instance, law enforcement, regulators, and financial institutions—focuses on what matters most. Indeed, regulators also acknowledge that increased sophistication and innovation are what is going to move the needle on true financial-risk management.

Bob Bartels: How can compliance organizations build resiliency?

Olivia Conjeaud: In terms of resiliency, compliance organizations need to stay abreast of the old challenges and the new challenges coming. This could be digital assets or more integration between cyber and AML.

Marilu Jimenez: Compliance officers have to focus on innovation. What’s out there? What can and can’t help us do our jobs better? Organizations need to embrace technology and be on the lookout for what’s next. Lastly, it’s critical that the industry shares best practices and adopts those that are a success.

Peter Wild: To ensure relevancy, you must keep an eye on all of the moving parts, making sensible and thoughtful decisions that will allow you to improve. Flexibility is key, and if your organization is rigid in terms of a particular program, that may limit your relevancy and effectiveness. Organizations must understand their risk appetite and follow a strategic plan which identifies those risks in order to mitigate them.

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