FATF Examines Technology use in Making AML/CFT More Effective

  • Richard Marley
  • July 05, 2021
  • 3 minutes read
  • 81

FATF has recognized the importance of combining human input and manual review with automation for identifying and preventing AML/CFT risks. 

In a recent report, the Financial Action Task Force (FATF) examined how the use of automation and emerging technology can help win the fight against money laundering and terrorist financing.  

The published report is a part of the FATF’s project to explore technological innovations to make AML/CFT more effective. It was finalized at FATF’s latest Plenary meeting, conducted between 21-25 June. 

The FATF stated that the use of technology can improve the speed, quality and efficiency of measures used by companies for combating money laundering and terrorism financing. It added:

 “They can help financial institutions and supervisors, assess these risks in ways that are more accurate, timely and comprehensive.”

The global financial watchdog said that the implementation of a risk-based approach, combined with the use of new, innovative technologies, will promote financial inclusion as financial services would become more accessible. This turn will reinforce the effectiveness of AML/CFT efforts. 

Building on this, the report highlights the significance of technology for collecting data, processing and analysing data, and helping concerned parties in detecting and managing money laundering and terrorist financing risks in real-time. 

Other benefits that have been brought into the spotlight include rapid payments and transactions, highly accurate identity verification systems, and enhanced monitoring, record keeping, and information sharing practices. 

In particular, the importance of AI-based digital solutions in the field of AML/CFT has been pointed out. 

The report adds that while the use of technology is highly encouraged, manual reviews and human input remains significant nonetheless. Some key challenges that hinder AM compliance efforts include the use of legacy AML/CFT compliance systems. 

The findings of the report reveal a set of suggestions from the FATF for government authorities. The suggestions have been laid down to advance the use of proper AML/CFT technologies. 

The suggested actions include:

  • Create an enabling environment by both government and the private sector for responsible innovation to enhance AML/CFT effectiveness
  • Ensure privacy and data protection when implementing new technologies
  • Promote AML/CFT innovation, which supports financial inclusion by design
  • Develop and communicate policies and regulatory approaches to innovation that are flexible, technology-neutral, outcomes-based and in line with the risk-based approach
  • Exercise informed oversight
  • Promote and Facilitate Cooperation

Additionally, governments have been advised to work in collaboration with the private sector to hold a holistic approach to new technologies, taking into account their potential as well as their limitations.

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