Driving Financial Crime Detection: The Innovative Adoption of RegTech Tools

Driving Financial Crime Detection: The Innovative Adoption of RegTech Tools

Embracing cutting-edge financial crime detection technology is critical for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) and Fraud teams.

Nevertheless, the adoption of the latest RegTech tools does not adhere to a single pattern. Instead, it necessitates a mental shift and an openness to inventive and recurrent strategies. The recent ACAMS Hollywood conference featured a panel discussion, organised by Hawk AI, which delved into the novel ways financial institutions can overcome resistance and smoothly incorporate RegTech into their workflow.

The panel discussion, moderated by Austin Hong, a partner at Oliver Wyman, saw Tobias Schweiger, co-founder & CEO of Hawk AI, and Xan Kasprzak, VP Product at CSI, as the key panelists.

Hong initiated the discussion by seeking audience opinion. A considerable majority of the audience expressed that “lack of IT resources and prioritisation” is the biggest hurdle in adopting new technology within their organisations. This indicates that the sluggishness in technology adoption results from the top-tier management’s failure to regard it as a business priority, thereby not allocating funds, manpower, and resources appropriately.

The recent significant strides in compliance technology, particularly in the last three to five years, was emphasised by Hong. He pointed out that despite an increase in financial crimes and rising pressure on financial institutions to detect these crimes, coupled with increasing non-compliance fines, there still exists inertia in the adoption of such crucial technology.

Schweiger discussed the rising demand for cloud-based solutions and AI/Machine Learning technology amongst financial institutions. These technological advancements facilitate quicker implementations and scalability, thereby streamlining processes and speeding up market entry. However, the widespread reluctance remains an impediment to adoption, despite these clear benefits.

Overcoming obstacles to implement new technology for AML/CFT and Fraud requires selling the idea of the technology adoption to internal stakeholders. Addressing these hurdles head-on, financial institutions can smooth the way for successful implementation and unleash the potential of new technology in the fight against financial crime.

Some financial institutions may opt for a system augmentation over a complete “rip and replace” of the existing system due to the cost of transitioning from legacy systems. The strategic choice between system augmentation and replacement relies on a thorough evaluation of the legacy system’s capabilities and potential for augmentation.

Making a compelling business case for new AML/CFT and Fraud technology requires highlighting the business benefits. Efficiency, robust security measures, seamless customer interactions, real-time fraud detection, and prevention are all significant advantages.

Financial institutions need to question if they have the resources and the capability to successfully implement new technology. This calls for suitable funding, skilled workforce, and infrastructure support.

Regulators play a vital role in the adoption of AI technology for AML/CFT and Fraud prevention. Regulators’ evolving and supportive attitude towards AI adoption is encouraging, as they acknowledge the technology’s potential to enhance financial crime prevention efforts.

Ultimately, the implementation of new technology does not have to be an all-or-nothing game.

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