Meeting regulatory expectations

Reported by Keith Berry

Financial institutions are beginning to adopt AI more widely to enhance efficiency in AML compliance.

While regulation around the use of AI in AML compliance continues to evolve, regulators generally support companies experimenting with AI to strengthen AML processes, as it offers the potential to reveal risk, reduce false positives, and prioritise instances of suspicious activities among the large volume of alerts generated in AML processes.

Specific regulations regarding the use of AI in compliance are yet to be established. However, in the US, regulators have provided guidance that encourages institutions to explore its potential.

This guidance emphasises that experimentation with AI does not automatically trigger increased regulatory scrutiny, even if it reveals areas for improvement.

The Financial Action Task Force also recognised the value of AI and new AML technologies in accurately analysing data in real time.

Transparency and explainability are key to ensuring regulators have visibility into the workings of AI models and decision-making processes.

Institutions will naturally want to understand how their AI makes decisions — how it is trained, how potential risks can be identified and addressed, and how bias is mitigated. Failure to execute this balance properly and demonstrate control could result in fines and reputational damage. 

Read full report: https://www.ftadviser.com/regulation/2023/07/25/leveraging-ai-to-enhance-anti-money-laundering-efforts/?page=1