Transforming AML: Key Insights from ACAMS Hollywood 2024

In April, industry professionals from around the globe converged at the ACAMS conference in Hollywood, a gathering known for setting the agenda in the Anti-Money Laundering (AML) realm. This year’s event was no different, shedding light on the evolving challenges and opportunities in combating financial crime. As a product leader and ex-practitioner, I am deeply entrenched in the world of AML, risk, and compliance and felt privileged to attend and engage with practitioners and innovators alike who are trying to move the industry forward in how we approach these critical issues. I’m excited to share with you three key takeaways from this year’s conference that highlight where law enforcement, regulators and banks are focused and whereas an industry should responsibly, yet intelligently, challenge convention from a technology standpoint.

My three key takeaways:

1. Focus on Cybercrime and Convergence of cyber, fraud and AML
2. Cautious exploration of “AI”
3. National Security

Convergence of Cybercrime, Fraud and AML

One refreshing development this year was the increased dialogue around cyber-enabled fraud and money laundering. Executive Associate Director of US Homeland Security Investigations (HIS), Katrina Berger, emphasized the significant focus on interdicting money mules using synthetic identities as a key focus for HSI. Berger noted that Chinese Transnational Criminal Organizations (TCOs) are using counterfeit passports and IDs, including synthetic identities, to deposit massive amounts of cash, showing indifference towards the filing Currency Transaction Reports (CTRs) or Suspicious Activity Reports (SARs). This underscores the urgent need for more effective methods to proactively identify and combat these organizations.

As mentioned in panels discussing fraud prevention and stopping money mules, the strategy starts with moving beyond reliance on Customer Identification Programs (CIP) for fraud prevention. Instead, incorporating biometric identification and liveness checks into the Know Your Customer (KYC) process is crucial to deter these criminals before they infiltrate the financial system.  As mentioned by David Szuchman, Head of Financial Crime at PayPal, “CIP is not a fraud control…the identity piece is where it starts.”

This panel stood out as one of the conference’s most enlightening, merging perspectives from law enforcement, government, industry and technology. It underscored the necessity of targeting financial crime through a holistic view of crime. In response to a question on how we can start to slow and prevent fraud, panelists agreed that fraud is not just occurring in the silo of fraud; therefore, we must be combining efforts in cyber, fraud and AML.  Jill Adams, Strategic Engagement Lead in Financial Crimes at the FBI, captured this sentiment (and I’m paraphrasing here): “We’re witnessing a convergence in crime types and perpetrators – from cartels engaging in fraud to terrorist organizations financing their activities using fraudulent proceeds. We cannot afford to view fraud in isolation. We must consider the entire spectrum of criminal activity.”

Another insightful takeaway was the misuse of products by criminals. Financial Institutions (FIs) need to understand the risks associated with their products and how they can be exploited. Involve product in discussions around AML and fraud prevention and give the intended product uses to investigators, so that they can spot when a product is being used in a nefarious manner.

Combining insights from cyber, fraud, and AML was a clear priority for law enforcement, but inconsistencies remained across US and LatAm FIs. When asked about how FIs address money mules, the response ranged from “not an issue” to recognition of the challenge but limited tools to identify and report these criminals.

Cautious Exploration of AI

There was recognition in the fraud prevention space that FIs cannot rely on rules-based systems and must embrace AI to stop fraud in real-time, yet palpable caution in its application within AML contexts.

First, a clear distinction between AI, machine learning (ML) and Robotic Process Automation (RPA) is necessary. I heard a lot of mention of the application of “GenAI” in fraud prevention and AML, which addresses different use cases from the likes of big data AI and machine learning, for example. I would encourage ACAMs to offer a 101 on technology trends – for example, different AI methodologies in fraud prevention and AML and best practices for adoption – where practitioners and regulators are brought together to present and attend. Education about technology trends can significantly reduce fear and apprehension. Supervised machine learning, for instance, is not a black box and can considerably enhance AML efforts.

Panelists across the conference were rightly concerned with how FIs prepare data to be used in machine learning – for fear of missing suspicious activity or inappropriately using biased data sources, but can we change the narrative from concern with missing something by applying technology, to concern that if we don´t use technology and diverse intelligence sources that we equally are missing the boat? Data preparation, collaboration across departments and appropriate planning are all necessary steps for implementing innovative technologies. But let´s not let it keep us from advancing as an industry.

Second, FIs expressed the need for feedback from government entities on what IS suspicious (e.g. feedback on SARs), before we can train models to use in AML Transaction Monitoring systems. While I agree this feedback is long overdue from law enforcement, it should not halt us from the pursuit of innovative approaches to identifying crime. There are other intelligence sources that can inform on illicit activities.  Leveraging intelligence from cybersecurity (is the IP used by the transacting customer associated with others?) or fraud investigations (has the account, IP, or device been associated with other fraud cases?), can provide crucial insights.  As we tell our investigators, we need to work smarter, not harder. And it starts with leveraging the intelligence at our disposal. I would push the industry to challenge ourselves by leveraging intelligence other than government SAR data, whilst also pushing FinCEN to share SAR feedback. As Jill Adams pointed out, “Fraudsters operate at the speed of money, whereas law enforcement operates at the speed of law.” We need to work smarter and faster, with technology as a key enabler.

National Security

The nexus between anti-financial crime measures and US national security was a central theme at ACAMs this year as well.  With the US Dollar underpinning the global economy, it was clear that compliance is not simply a “check-the-box exercise”; it is a matter of foreign policy and national security.

Nation-state actors aim to acquire advanced US technology to advance their military capabilities and upset the balance of power. Anti-financial crime strategies play a pivotal role in preventing sensitive technologies from falling into adversary hands through export control screenings and monitoring transactions for dual-use technology exports.

Moreover, these adversaries often mask their identities to not only launder funds, but also to invest in US companies using fake companies and synthetic identities. As mentioned by Joshua Fruth, law enforcement focuses on preventive targeting – denying revenue generation – as well as forensic identification. As an industry, we must also prevent these actors from infiltrating our financial system through improved onboarding technologies, as well as better use of intelligence from across the organization.

The 2020 AML Act mandates that FIs incorporate the national security priorities: corruption, cybercrime, foreign and domestic terrorist financing, fraud, transnational criminal activity, drug trafficking organization activity, human trafficking and human smuggling and proliferation financing. These national security priorities can only be effectively achieved by breaking down silos and embracing technology judiciously.

ACAMS Hollywood 2024 wasn’t just another event in the calendar of financial crime and compliance gatherings; it was a clarion call for the industry to adopt a more integrated and technologically advanced approach to fight against money laundering, fraud, and cybercrime. As we reflect on the insight and foresight shared by experts, it’s clear that the road ahead requires us to break down silos and embrace innovation—whether through the judicious application of AI in AML or rethinking our strategies in light of national security concerns. The journey towards integrating AI into AML practices, understanding the amalgamation of cybercrime, fraud, and AML, and acknowledging the intrinsic connection between anti-financial crime efforts and national security, signifies a pivotal shift in the industry.

As we forge ahead, equipped with fresh perspectives and a fresh determination, let us remember the collective challenge it will be to harness technology responsibly while fostering a culture of innovation and collaboration among stakeholders.

Together, let’s move towards a future where financial security and integrity are not just ideals but realities.  The time to act is now.

Contact me: Alyssa Iyer