Digital Transformation of AML/CFT

Technology is transforming the way we work and live. In many fields, it offers considerable efficiencies and cost savings. The FATF is exploring the opportunities that technology can offer to improve anti-money laundering (AML) and counter-terrorist financing (CFT) efforts.  New technologies for AML/CFT refer to:

  • innovative skills, methods, and processes that are used to achieve goals relating to the effective implementation of AML/CFT requirements or
  • innovative ways to use established technology-based processes to comply with AML/CFT obligation

 

FATF’s work focuses on three distinct areas:

 

  • The opportunities and challenges of new technology to help the private sector and supervisors implement AML/CFT measures more efficiently.

This FATF project aims to increase awareness of and identify opportunities to leverage emerging and existing technology-based solutions. It identifies the conditions, policies and practices that can help support the development and adoption of new technologies that contribute to the efficiency and effectiveness of AML/CFT. It also examines regulatory obstacles or other factors impeding the successful adoption of new technologies.

 

  • The role of data pooling, collaborative analytics and data protection, taking stock of technologies that facilitate advanced AML/CFT analytics within regulated entities or collaborative analytics between financial institutions, while respecting national and international data privacy and protection legal frameworks.

This project examines commercially available or emerging technologies that facilitate advanced AML/CFT analytics within regulated entities. It also looks at technologies that allow collaborative analytics between financial institutions, while respecting national and international data privacy and protection legal frameworks.

Technological advances in recent years allow financial institutions to analyse large amounts of structured and unstructured data more efficiently and identify patterns and trends more effectively. Data pooling and collaborative analytics can help financial institutions better understand, assess and mitigate money laundering and terrorist financing risks. This will make it easier, more dynamic, effective and efficient to identify these activities. It can reduce the number of false positives, enabling the private sector to comply in a timelier and less burdensome manner. It can also help prevent criminals from exploiting the information gaps, as they engage with multiple domestic and international FIs, each having a limited and partial view of transactions. However, it may also infringe on the protection of individual and fundamental rights. Therefore, it is imperative that any exchange of information respects national and international legal frameworks for data protection and privacy.

 

  • The role of big data and advanced analytics in transforming the capabilities of operational agencies in detecting and investigating  money laundering (ML) and terrorist financing (TF) and understanding ML/TF risks.

This project will help operational agencies to harness technology to strengthen their operational capability and resilience. It focuses on the questions of how to identify appropriate tools and technologies, and optimise their use at different stages of the AML/CFT workflow. It examines how to remove barriers to any successful digital transformation. It also covers issues concerning secured, effective, and efficient data communication and information sharing within public sector, and between public and private sectors. 

 

These digital transformation projects build on earlier work such as the FATF Guidance on Digital ID, Guidance on virtual assetsVirtual Assets - Red Flag Indicators of Money Laundering and Terrorist FinancingGuidance on Private Sector Information Sharing, and extensive engagement with the private sector through public-private workshops and the FATF Private Sector Consultative Forums (PSCF).

 

The projects rely on research and interviews with public and private sector stakeholders, including representatives from financial institutions, technology developers, and AML/CFT and data protection and privacy (DPP) authorities. The FATF also circulated an online Digital Transformation Questionnaire to AML/CFT national authorities and private sector stakeholders (including academia, FIs and technology developers), to identify the various new technologies available.

 

The FATF additionally hosted two High-Level Roundtables on Digital Transformation on 10-11 March 2021 for an open-minded and informed dialogue with key groups, including data protection authorities, financial institutions and technology developers.

More on:

    San José Principles - Adopted in 2017 by the FATF and 150 representatives from the FinTech and RegTech sectors and financial institutions, to ensure a constructive dialogue and engagement between private and public sector and strike the right balance between supporting innovation and managing any ML/TF risks that arise. |  Read more   

     

    Digital ID  - The FATF Guidance on Digital ID explores how to determine whether a digital ID is suitable and reliable to use for customer due diligence. Since its release in 2020, this guidance has been an important resource for ensuring access to essential and secure financial services – especially during the pandemic.  Reliable digital ID also contribute to financial inclusion, and make it easier, cheaper and more secure to identify individuals in the financial sector.  It can also help with transaction monitoring requirements and minimise weaknesses in human control measures.