Treasury official points to joint BSA/AML ‘innovation’ statement as key to improving effectiveness

Improving the effectiveness and efficiency of anti-money laundering laws – and opening thedoor to bankers for ideas in protecting the financial system from illicit threats – were two objectives outlined by one of the Treasury Department’s top law enforcement officers in remarks Monday (and released Tuesday).

Treasury Under Secretary, Terrorism and Financial Intelligence Sigal P. Mandelker told the American Bar Association/American Bankers Association Financial Crimes Enforcement Conference in Washington, D.C. (National Harbor) that her office wants “to promote innovation in the private sector to help us achieve our shared objective of protecting the financial system against the full range of illicit finance threats.”

She said that effort extends to working with financial institution “regulatory colleagues” to improve the effectiveness and efficiency of the Bank Secrecy Act/anti-money-laundering  (BSA/AML) regime. “And we will be providing the private sector with additional information and clarity as to our expectations,” she said.

Mandelker pointed to the joint statement released by federal banking and credit union regulators about BSA/AML programs Monday as recognizing that private sector innovation, including ways of using existing tools or by adopting new technologies, “can be an important element in safeguarding the financial system against an evolving array of threats.”

She said some financial institutions are becoming increasingly sophisticated in approaches to identifying suspicious activity. For example, she said, by building or enhancing innovative internal financial intelligence units devoted to identifying complex and strategic illicit finance threats and vulnerabilities. “Some are also experimenting with artificial intelligence and digital identity technologies,” she told the group.

“When responsibly deployed, these types of innovations are already proving valuable,” she said. “They have helped us identify potential front companies acting for North Korea and Iran, for example. I have also heard encouraging reports that new technologies are helping banks reduce the rate of false positive alerts, which can free up resources to focus on more impactful activities.”

To build on these initiatives, the joint statement encourages banks to consider, evaluate, and, where appropriate, responsibly implement these and other types of innovative approaches, she said.

Under Secretary Sigal Mandelker Remarks ABA/ABA Financial Crimes Enforcement Conference December 3, 2018