Financial crime is big business. The UN estimates that the amount of money laundered globally in one year is 2 – 5 percent of global GDP, or $800 billion – $2 trillion in current US dollars. Less than 1 percent is ever seized or frozen by law enforcement agencies. It was rightfully under the spotlight at the World Police Summit that took place in Dubai 7-9 March.
New technologies have also given illicit actors the means to exploit the financial system further to their advantage. The anonymity granted by virtual assets is one well-known example.
Fighting financial crime appears a daunting prospect, but consider this. What if the same new technologies could also be game-changers in the fight against financial crime? There are notable areas where that can be the case.
Detecting and disrupting financial crime has historically required thousands of investigators to manually review high-risk transactions and accounts. Intelligent technologies – such as AI, robotics, natural language processing and machine learning – improve the speed, quality and efficiency of traditional processes.
This is enabling the centralisation of data, which moves beyond a complex world of endless Excel spreadsheets. The result is real-time analysis of correlations and patterns leading to humans gaining a greater depth of understanding with increased efficiency. This enhanced capacity to collect and process data has many advantages for both private sector firms and supervisors.
For firms, it enables smoother client onboarding, maintenance, screening and reporting. Monitoring a client’s transactions, such as transfers, deposits and withdrawals, is an area with the most potential, given the speed and ability to identify unusual transactions. The more accurate the monitoring, the greater the client protection. The more accurate the suspicious activity reports, the quicker the system.
For supervisors, it enables the effective oversight of more entities, alongside a more detailed understanding of the risks associated with different sectors. Importantly, it allows for more efficient communication with other competent authorities, such as law enforcement, about suspicious activity. This leads to a quicker disruption of illicit activity.
If used strategically and at scale, data analytics can support a dynamic and more precise assessment of money-laundering risks, and thereby enhance authorities’ abilities to stop financial crime in its tracks. This includes opportunities to monitor macroeconomic trends in real time, such as the evolution of financial flows in response to geopolitical or regulatory developments, or to more systematically analyse the financial activity of institutions or geographic areas to determine whether it is consistent with a range of contextual factors.
Using data and analytics for financial intelligence, supervision and enforcement is also a long-term economic opportunity.
The opportunities for entrepreneurs are just as significant as they are for regulators and law enforcement authorities. The latest research from leading analyst firm Juniper Research estimates that global software spend on financial crime prevention tools will exceed $28.7 billion by 2027, increasing from $22.1 billion in 2023. This growth of 30 percent will be driven by cybercriminals’ strategies of targeting the ever-growing transaction volume of payments over digital channels.
The UAE is fertile ground for RegTech developments.
It is a forward-looking, digitally enabled society. To stay at the very forefront of digital developments, clear-sighted strategies have already been put in place. This includes attracting the brightest and best from around the world – alongside incubating innovation in RegTech.
In a short period of time, the UAE has emerged as home to several of the world’s most active Fintech sandboxes. The UAE’s leading financial centres have well-established clusters of Fintech companies, and Dubai was placed within the 30 most innovative cities by the 2022 Cities Innovation Index with Abu Dhabi also featuring.
Fighting financial crime in all its forms is a strategic priority for the UAE Government.
This can be seen in the UAE’s embrace of a technologically-advanced future in the fight against financial crime. Supervisory authorities, financial intelligence units and relevant law enforcement agencies are adopting a strategy to identify and harness opportunities for the use of data analytics in an anti money laundering (AML) context. They are working hand-in-glove with the private sector to fully embed new tools and maximise their effectiveness.
At the Executive Office of AML/CTF we have embarked on a digital transformation that will take all our operations onto the cloud. Like other entities in the UAE, we are also evaluating how best to incorporate AI into our systems to further increase our effectiveness. The transformation builds on the national implementation of digital tools such as goAML and FawriTick that have put the UAE at the forefront of tech in the AML/CFT context.
The financial system is, after all, the gateway through which criminals must pass to make crime pay. Our challenge therefore is to monitor entry, devise controls and erect barriers powerful enough to stop bad actors in their tracks. In particular, it is becoming increasingly apparent that disrupting financial crime in real time must remain a strategic priority.
As the pace and complexity of the financial system continues to increase, the effectiveness of global financial crime efforts will be contingent on the readiness of governments to innovate in a strategic and coordinated manner. That is why the World Police Summit is a key forum for coming together, sharing ideas and discussing the best route to the real and tangible change we seek.
The potential when we collaborate is enormous.
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