We were delighted to participate in the ACAMS conference in Hollywood, Florida last week. Between our Innovation talk on the different lever points banks could target to refine their existing AML program to our presence on the show floor we had dozens of conversations about how machine learning is transforming the very nature of financial crime.
Here are three things:
- We are at peak hype for AI. This is partly due to aggressive marketing, partly due to engaged buyers and partly due to real world results – but the fact is that AI feels a little frothy right now. Like any cycle, this will resolve itself, mostly through an increased level of discernment on the customer side. We are already seeing better questions around key areas like:
a) can you justify the results to regulators and internal model review boards?
b) can you point to operational solutions producing real results?
c) does your team have the bona fides to actually deploy?
d) can you scale outside of a POC in the face of real data?
These are just starter questions, the banks that are serious are getting more granular depending on the use case.
- This is a dimensional and evolving space. While there is plenty of attention on KYC and how it can be improved, there are other areas that are proving to deliver even larger ROI. These include intelligent segmentation, intelligent alert dispositioning and the emerging field of intelligent typologies. Going forward we fully anticipate a migration away from transaction monitoring and towards behavior monitoring. The reason these areas offer superior ROI is that they often enhance the existing infrastructure – limiting disruption, upgrades and other items that eat into a project’s viability. This notion of improving what exists while looking to the future is the dominant position – although it should be noted that at least one bank we talked to has said they are not interested in improving what they have – they want to blow it up and start over.
- Regulators aren’t just open to AML innovation, they are competing to accelerate it: This position was underscored when Ken Blanco, director of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced he was hiring an advisor to drive innovation. Samuel Rubenfeld at the WSJ covered Ken Blanco’s statements in his article here. More and more, we’re seeing regulators globally openly discuss the need for banks to innovate in the AML space – running hackathons (FCA) creating sandboxes (MAS) and bringing technology, regulators and practitioners together for serious discussion. This ties back to the first point – if you are in the AML innovation space as a vendor and are not engaged with regulators then you aren’t real because that is where the rubber hits the road.
Speaking of where rubber hits the road. We will be participating in a Risk.net webinar on AML on May 3rd. The lineup is stellar, with Ayasdi CEO and Co-Founder Gurjeet Singh, Accenture’s Scott Nathan, HSBC’s Patrick Dutton and US Bank’s Jim Arndts. The group will discuss what is driving innovation, how it goes to market and how you interact with the regulator. To register just hit the link here.