From the Editor

From the Editor: Rise of the Compliance Bots?

By Kieran Beer

Several dystopian novels describe a future in which homo sapiens become enslaved or extinct because of the rise of robots and computers unwisely endowed with artificial intelligence by humans.

Current buzz in the compliance world doesn’t entail speculation on our extinction. However, there has been talk this month about the potential for regtech, or regulatory technology, to save banks vast amounts of money. No small part of the savings would be realized by replacing thousands of compliance officers with compliance bots.

Asked about what type of reduction in regulation would benefit financial institutions most, Sullivan Cromwell’s Senior Chairman Rodgin Cohen told Bloomberg television that “anti-money laundering [compliance] is the single biggest user of expenditure and personnel.” He then called for the speedy deployment of a utility that would reduce the staffing burden for banks while also creating better programming for AML and anti-financial crime efforts. More

Across from the Bloomberg studios in Midtown Manhattan, The Wall Street Journal reported that compliance could be revolutionized by financial technology, including the rollout of a common ledger utilizing blockchain protocols for verifying the credentials of customers. More

Of course, the banking industry’s hope that regtech will allow cheaper, better compliance isn’t new, and it’s important to note that Cohen and others advocating a technology-based compliance solution generally aren’t talking about cutting AML compliance corners. They say the solution, which it isn’t clear actually exists yet, will make catching bad guys cheaper and easier.

Oversight of funds transfers post 9/11 is seen as essential to preventing financial crime, recovering its proceeds and providing intelligence about the finance of terror and weapons proliferation.

Correctly or incorrectly, the AML compliance community generally assumes that however anti-regulation President Donald Trump purports to be, the regulatory responsibilities that have increased in quantity and consequence since 2001 will remain in effect.

And it is a bit ironic that blockchain and other fintech innovations may actually empower the government and financial institutions with better tools to monitor transactions given the argument of the hardcore, Libertarian faction of Bitcoin proponents that the technologies could create an alternative monetary system beyond the prying eyes of public officials and private contractors.

“Does this new technology obscure or make transactions more transparent?” Gerald Cossette, the director of Canada’s Financial Transaction and Reports Analysis Centre, or Fintrac, asked rhetorically during our interview at the #FinTechTO Digital Finance Institute Conference last year. He went on to describe how fintech innovations could aid regulators in their oversight of transactions and that incorporating data-privacy concerns was the only obstacle towards that solution.

We have clearly entered a new world.

ACAMS moneylaundering.com
 has reported extensively on banks partnering with fintechs, and shifting towards hiring more compliance professionals capable of performing complex data analysis and other technology-centric tasks. More, More and More

Let’s hope it’s not a “Brave New World,” but one that ensures a safer financial system.

It is also likely to be a world that will—at least for the foreseeable future—require compliance professionals to undergo new training and acquire new skills rather than replace them altogether with bots.

 

kbeer@acams.org

Follow me @KieranBeer on Twitter

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