Automate AML?

I could use some advice settling a little debate with my roommate. We’re both college seniors getting ready to graduate this coming May. His degree is in accounting and mine is in computer science. He wants to become a licensed CPA, and I want to go to grad school for robotics.

Earlier this week, we got into a debate about white-collar crime. I was frustrated because of how widespread financial crime and corruption is in the market, and my roommate was trying to disagree. I was proposing that in a lot of cases, resorting to automation is probably safer and more efficient than existing methods.

My roommate asked for examples. My first one was global investing, since he’s a proponent of algorithmic stock trading. He wasn’t very convinced with the example, but I couldn’t think of any others because I don’t know much about financial crime. Are there other examples where technology can or already is preventing financial crime?

Your debate sounds like a classic quarrel between an evangelist and a skeptic. Technology in the eyes of the evangelist holds abundant promise. The skeptic, on the other hand, primarily sees only the possible risks. Many find the realist perspective the most appealing, since it takes a balanced approach. Fortunately, there are countless examples of technology successfully undermining illegal financial activities.

One compelling example might be the anti-money laundering (AML) regulations stipulated by the Bank Secrecy Act (BSA). Modern civilization has given rise to organized crime syndicates with more power, influence, and capability than ever before. Chief among their priorities is hiding the profits they reap from a host of black market activities. These well-financed and well-motivated criminals are becoming increasingly sophisticated in their efforts to elude authorities.

Your roommate can surely appreciate the gravity of thwarting international crime by depriving it of precious financing. That’s why compliance is key, if not exceedingly onerous and costly to enforce. Those that fail to face the music are liable to wind up in headlines, such as what happened with the Russian “Global Laundromat.” Experts at PWC explicitly encourage businesses to use the right tools for anti-money laundering compliance. Automation is the common theme across a multitude of industry standard technologies, which shouldn’t come as a surprise.

The globalized economy is forcing people, businesses, and governments to adapt to a changing landscape. A fledgling venture capital firm with a global clientele, for instance, should eventually expect to rely on technology. For those that want to be successful, having an effective AML compliance program is non-negotiable. The only real debate for an organization is whether to tap into external expertise or recruit and develop it internally.

You could probably discuss the pros and cons of those different strategies separately. The takeaway is acknowledging that the nature of compliance makes it a prime candidate for automation. It’s difficult to deny the inherent value of replacing manual processes prone to human error and/or corruption with automated ones based on strict and completely impartial rules. It’s also important to remember how large the financial penalties are for non-compliance, which won’t begin to account for what could be lost with a tarnished reputation.

These are just the beginnings of a strong argument in favor of technology, but don’t underestimate the value of some healthy skepticism.

“You can’t escape the responsibility of tomorrow by evading it today.” – Abraham Lincoln

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