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FATF Examines Technology use in Making AML/CFT More Effective

Richard Marley
July 05, 2021
3 minutes read
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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.”

New technologies are vital to the fight against money laundering and terrorist financing. A new FATF report looks at the opportunities and challenges of new tech in this area. See more details here ➡️ https://t.co/PaX4JUqx6G #FollowTheMoney pic.twitter.com/QqK3bcXQDE

— FATF (@FATFNews) July 2, 2021

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.

Disclaimer: No warranty is herein provided that the information contained in this document is accurate, up-to-date, and/or complete. In no circumstance(s), does such information constitute legal or any other advice. Any person who intends to use, rely, pass-on, or re-publish the information contained herein in any way is solely responsible for the same. We suggest to verify the information and/or obtain expert advice independently if required.

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Blockchain and NFTs - Setting New Standards for Cybersecurity and Identity Management
Non-fungible tokens (NFTs) are an evolution over the emerging concept of cryptocurrencies. As finance systems are getting modernized, consisting of innovative trading and loan systems for different types of assets, ranging from lending contracts to real estate and artwork. However, by making digital representations of physical assets like painting, NFTs are the most advanced form right now to re-invention the finance infrastructure. Thus, the idea of representing physical assets in digitized form is not new, however, these concepts are combined with the significance of tamper-resistant blockchain of smart contracts.

Contrarily, blockchain and NFTs are also playing a crucial role in making the digital ecosystem secure, as fraudsters are becoming more sophisticated and are capable of exploiting cybersecurity systems. Thus, by utilizing the potential of blockchain technology and NFTs, an entirely new level of security can be attained.

Blockchain Technology – Revolutionizing Cybersecurity and Identity Management In Digital Ecosystem

Primarily, blockchain technology is the key driving force behind the success and emergence of cryptocurrencies. This technology is completely transforming the concept of payment gateways along with enhancing cybersecurity concerns. Blockchain technology utilizes cryptography to make transactional records that are unchangeable and can’t be tampered with. NFTs are also backed by this technology and are uniquely categorized through a cryptographic token that provides an extra layer of security by ensuring that each digital asset and transaction records are well- managed, easily being tracked and verified. In addition to this, NFTs are also designed to digitally represent physical assets, which has brought significant opportunities for businesses as well as individuals.

NFTs are now also being used to virtual depict something scarce, for example, in-game add-on features and other collectibles. Due to the unique identity of NFTs, they are providing more improving identification measures while enhancing cybersecurity. In addition to this, NFTs and blockchain technology are also empowering digital businesses to develop virtual ledgers to store cryptocurrencies and digital assets while maximizing security levels. However, the combination of blockchain and NFTs is considered the most advanced way of securing sensitive information and holds the necessary power to completely transform the use of the internet and cybersecurity.

Despite the fact, blockchain is the backbone of the digitization of payment gateways, it is setting new standards in the cybersecurity domain as well. By providing financial institutions and other businesses a decentralized platform to secure data, they tend to protect the companies through various cyber-attacks and financial losses. It also allows businesses to gather and maintain track of customers’ identities. Blockchain technology is signifying security innovations through the following aspects;

Security through Blocks: Blockchain basically works as a distributed ledger that stores and maintains a continuously growing list of client data records called blocks. Each respective block placed in the database is accompanied by a cryptographic hash of the previous block, a timestamp, and transaction data. The immutability feature of blockchain technology allows it to provide businesses and individuals with a sound sense of security and data protection. Other than this, it also backs businesses to determine and authenticate their identities before getting them on board and ensures data is not compromised.

Private and Public Blockchains: The concept of private and public blockchain is growing concerned nowadays. A private blockchain allows companies to communicate information without a designated central authority. On the other hand, the public blockchain databases are easily accessible to any individual in the digital ecosystem. However, both types of blockchain databases are highly secure and can not be exploited, as they deliver the maximum level of transparency. As a result, blockchain ledgers are becoming an ideal place to store digital data or assets.

Decentralized Technology: Blockchain technology allows both businesses as well as individuals to store cryptocurrency and private information in decentralized databases with a high level of encryption. With the decentralization feature, blockchain assures that hackers can get access to one’s identity. However, hacking attempts are impossible, as cybercriminals need to penetrate 51% of the blockchain system at once.

Smart Contracts: The emerging concept of the smart contract is getting global attention, as they are powered with blockchain technology that automatically handles the customer’s transactions and other dealings. They have attained customer trust by enforcing high-end security standards by being transparent and tamper-proof. Other than this, the financial firms are also using smart contracts to manage customer identities and PII. This also enables businesses to curb identity fraud.

Influence of NFTs on Cybersecurity and Identity Management

As businesses are going digital, keeping sensitive information secure and tamper-proof is becoming more difficult than ever. However, Non-Fungible Tokens (NFTs) are one of the crucial ways to make cybersecurity and identity management systems secure and unhackable. Many global firms are adopting NFTs to secure their client data.

The following are a few examples of how NFTs can be used to promote cybersecurity:

Integrated Security Features

NFTs aren’t directly used but are combined with other security measures to increase the productivity of cyber security systems. This includes, encrypting the messaging services, and generating digital ownership signatures on transactions. Other than this, NFTs also interact with identity verification services through authentication, to assure the customers are onboarding with legit identities. Despite all benefits, NFTs are also being used to uplift security measures as they are hard to replicate and link to other virtual assets. The cryptographs also improve data protection. Furthermore, NFTs can also provide an extra level of security for businesses and individuals, aiming to secure their transactions or operations.

Smart Encryption and Validation

NFTs come up with a “smart encryption and validation” method that enhances the effectiveness of security systems, making them secure. This system is particularly designed for the businesses that are providing trading services. NFTs smart encryption and validation uplift the identification and security of public as well as private blockchain databases.

Thus, the encryption and validation technology of NFTs is inevitable. It imprints digital signatures to each asset or transaction making it impossible for criminals to replicate it. This is how NFTs are preventing stealing of assets in the digital ecosystem.

How Shufti Pro Can Help

NFTs and blockchain technology are considered as the optimum ways to overcome identity fraud and financial crimes. Proof of ownership and digital signatures ensure that the data remains unbreachable. This concept will allow SaaS providers to enhance online identity verification solutions and cyber security protocols.

Shufti Pro’s state-of-the-art online identity verification services are an ideal solution for every type of business providing digital services. AI-backed ID verification services enable companies to determine the identities of customers before getting them onboard with 98.67% accuracy in less than a second.

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FATF Examines Technology use in Making AML/CFT More Effective

Blockchain Technology – Revolutionizing Cybersecurity and Identity Management In Digital Ecosystem

Influence of NFTs on Cybersecurity and Identity Management

Integrated Security Features

Smart Encryption and Validation

How Shufti Pro Can Help

Top 10 Technology Trends That Will Reshape the Travel Industry

1. Augmented Reality and Virtual Reality

2. Video KYC

3. AI-Powered Identity Verification Solutions

4. Automating Actions with Voice & Robotics

5. Contactless Payments and Self-Check-In

6. AI Chatbot

7. Big Data

8. Hassle-free Experience Recognition Technology Systems

9. Personalizing Passenger Journeys with Wearables & IoT

10. Making Security Seamless with Artificial Intelligence

Final Thoughts

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