Money laundering has emerged as one of the most severe financial crimes, hampering the economy of FIs. According to reports, 62% of FIs reported a year-on-year increase in fraud, posing a multifaceted challenge and affecting their predictive analytics and decision-making. The U. S. government introduced the Anti-Money Laundering Act (AMLA) to combat money laundering and other malpractices. In addition, the Financial Crimes Enforcement Network (FinCEN) implemented major amendments to AML regulations aimed at streamlining operations and empowering FIs to effectively combat financial crimes.

The functionality of AML has transformed over time, opening the gates of technological advancements while fighting against fraud. The trends in AML are thoroughly talked about below –

1. Promoting UBO Transparency:

UBO stands for Ultimate Beneficial Ownership, which includes individuals who are the sole owners of more than 25% of a company’s shares or voting rights.

• The Corporate Transparency Act was passed through the AMLA, which would legally obligate a certain portion of U.S. businesses to detail their owners and control structures to FinCEN so that criminals cannot hide money laundering behind a shell company.

FinCEN is also working to create a database to collect and manage the data, making it easier for regulators to investigate money laundering activities.

2. AMLA Expansion and Stronger Enforcement:

The expansion of AMLA has broadened the scope of AML regulations. FinCEN and other authorities are granted powers to enforce AML laws, impose stricter penalties, and enhance international cooperation.

• Under AMLA, whistleblower protections are strengthened, and rewards are increased for reporting AML violations.
• The act also requires FIs to implement a more risk-based approach in their compliance efforts, focusing on higher-risk customers/members and transactions.

3. AML compliance for cryptocurrency and digital assets:

The emerging trends in cryptocurrency and digital assets have brought significant compliance changes in the AML regulations. FinCEN, in accordance with AML regulations, has mandated that cryptocurrency exchanges and wallet providers adhere to the AML and KYC guidelines.

• The Infrastructure Investment and Jobs Act (2021) expanded reporting obligations for crypto transactions, including tax reporting for transactions over $10,000.
• The Travel Rule for cryptocurrency transactions exceeding $3000 was introduced, and the FIs must record and share it for a transparent and easy flow of currency through crypto channels.

4. BSA Extension:

BSA extended its guidelines to incorporate major players in the financial and non-financial markets, including money service businesses (MSBs), casinos, and fintech companies. It now requires FIs to record and report Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) more diligently. Transactions involving cross-border transactions must also be scrutinized mandatorily.

5. Emphasis on the Real-Estate Industry:

The real-estate industry is one of the most sensitive domains, and is easily prone to money laundering, mainly through high-value properties. Geographic Targeting Orders (GTOs) are broadened to require title insurance companies to report transactions where buyers purchase properties using shell companies and all-cash deals. To augment the safety and security of FIs, a permanent regulatory framework might also be introduced to mandatorily report it nationwide.

6. Enhance Artificial Intelligence (AI) use and Innovation:

The emergence of the technological advancement and implementation of AI will help FIs to streamline their operations. AI will allow FIs to improve the efficiency of transaction monitoring, detect anomalies, and reduce false positives in SAR filings. FinCEN also believes in augmenting compliance efforts through AI and machine learning (ML) to fully control internal controls.

7. AML Whistleblower Programs:

These programs play a major role in actively reporting money laundering violations. The incentives associated with such reporting are also strengthened with the new provisions offering rewards up to 30% of monetary penalties collected when strict actions are taken by whistleblowers, for example – SECs whistleblower program.

8. Cross-Border Cooperation and Global Harmonization:

International authorities are collaborating with U.S. regulators to mutually follow and adhere to AML regulations and strengthen enforcement against global money laundering networks. The Financial Action Task Force (FATF) checks whether the activities of FIs align with U.S regulations.

9. Tighten Sanctions Compliance:

The Sanctions have been used more aggressively to target entities involved in money laundering or terrorist financing, especially focusing on individuals, corporations, and FIs linked to rogue states, criminal enterprises, and terrorist organizations. This has made the Office of Foreign Assets Control (OFAC) more aggressive about sanctions compliance within the financial service industry, and fines can be brutally heavy if faced without compliance.

10. Automating KYC:

Know Your Customer (KYC) is the most crucial step taken by FIs to comprehend customers’/members’ interests and check their validity before commencing any operations with them. The adequate use of AI and ML in the KYC process has reduced the time and effort taken to arrange customer/member data. Biometric identification has also helped FIs establish authentication standards.

FIs are standing at the edge of leading the world and its operations to technological innovation. But what perks can tech and automation bring that make it a priority for FIs? Let’s read below –

The functionality of AML has transformed over time, opening the gates of technological advancements while fighting against fraud. The trends in AML are thoroughly talked about below –

1. AI-Powered Solutions: Boosting Efficiency and Cost Savings:

One of the top trends of 2024 to unfold for financial crime prevention is AI. AI organizations are cutting big checks into AI technologies to enhance their investigations, improve the SARs, and carry out more holistic case management. Advanced tools can be used by FIs to mine large datasets, automatically process boring tasks, and provide faster and far more comprehensive results.

2. Incorporation of GenAI in Operations:

Integration of generative AI in KYC, CDD, AML, and fraud detection is gaining speed. AI transformation reduces costs and improves detection accuracy, so organizations remain ahead of criminals. Enterprises must adopt AI innovation at breakneck speed to remain competitive and not run afoul of regulations.

3. Verticalized Large Language Models (LLMs) for Industry:

While 2023 was the year of open-source GPT models, 2024 centers on verticalized LLMs, can also be stated as huge language models with industries in mind. These models do not require further context or explanation, thus speeding up and making it more precise. These models will optimize data analytics and feedback loops to help an enterprise streamline all its processes. The result of using such optimized data analytics and feedback loops is an increased speed in detecting and preventing financial crimes.

4. Predictive AI and GenAI: The Epitome of Technological Revolution:

Predictive AI indicates the adequate use of ML to analyze past events and predict the future based on the analysis’s outcomes. It has been in action for the past few years; however, the amalgamation of predictive AI with GenAI is presented as the epitome of a technological revolution that will smoothen the operations of FIs.

5. SaaS Integration:

SaaS, also known as Software-as-a-Service, integrates itself into the significant operations of FIs due to its simple framework and extraordinary results, which are accompanied by authenticity and reliability. It empowers FIs with time-saving and economical solutions, ensuring efficiency and reducing security risks by remaining compliant with the AML regulations.

6. Real-time Transaction Monitoring and Suspicious Activity Reporting:

AI-driven technologies augment the trust of customers/members by offering real-time monitoring of transactions and reporting any suspicious activity arising in between. They allow banks to manage the lifecycle of investigation, which improves customer/member retention by 30%.

The risk of money laundering is mainly on FIs that are negligent in their compliance. To prevent financial crimes like money laundering, Quinte Financial Technologies (Quinte) offers its flawless AML solution, accompanied by Quinte’s Service Desk. The core objective of our AML solution is to accelerate the investigation and onboarding process. It simultaneously allows FIs to receive timely alerts forwarded by the BSA.
Quinte’s AML service can reduce the rate of false positives, lower the cost of compliance, and make faster and more consistent decisions at a scale designed to significantly save time in risk analysis and manual due diligence during KYC checks and timely reviews.

The evolving landscape of anti-financial crime in 2024 presents both opportunities and challenges. AI-powered tools, verticalized LLMs, and real-time transaction monitoring are set to reshape how FIs detect and prevent fraud. By staying informed about these trends and adopting the latest technologies, organizations can improve efficiency, reduce costs, and stay one step ahead of criminals in the ever-changing world of financial crime.