On April 7th, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) intended to fundamentally reform financial institutions’ (FIs) anti-money laundering and countering the financing of terrorism (AML/CFT) programs.
This is a big deal—not just because it’s been 25 years since the last notable changes—but also because FinCEN makes it clear that an FI’s use of AI to battle financial crime will likely put it in good graces with regulators. Consider this excerpt from the NPRM Fact Sheet:
“In determining whether to pursue an enforcement action or a significant supervisory action, or when reviewing a proposed supervisory action by a Federal banking supervisor, FinCEN’s Director would consider… whether the bank is employing innovative tools such as artificial intelligence that demonstrate the effectiveness of the bank’s AML/CFT program, among other considerations that FinCEN’s Director may deem appropriate.”
3 reasons why regulators are embracing AI for AML/CFT
Regulators are ‘all about AI’ now, and one can expect their embrace of AI will soon progress to a demand for AI, for several powerful reasons. First, criminals and other bad actors are leveraging AI to perpetrate new crimes in massive volumes and at tremendous speeds that are beyond the capabilities of people to detect, investigate, and respond to manually. So, scaling up compliance operations via AI and automation is the only realistic way for a bank, FinTech, or any other financial institution to keep pace with nefarious actors.
Second, governments are competing aggressively for global financial market relevance. As a result, federal governments are pushing their regulatory bodies to modernize and become savvy in the latest technologies. Those that succeed will have enabled regulators to promote the use of new technologies at financial services firms and help them in their battles against financial crime.
The third reason involves the substantial crime prevention aspect that AI agents deliver in AML/CFT compliance operations while introducing little to no risk. The involved processes are extremely well-defined and able to be isolated individually, making them ideal for AI Agents to improve both program scale and accuracy. As WorkFusion’s FI customers experience each day, AI Agents analyze and make decisions around millions of alerts each day in the following areas:
- Payment screening alert review
- Name screening alert review
- Adverse media monitoring
- Enhanced due diligence
- AML transaction monitoring
- Fraud
When FIs support their AML/CFT operations with AI agents, regulators feel more confident that their programs are designed and functioning to meet modern threats at the scale and speed required to be effective.
A greater focus on high-risk customers
One of the major reforms detailed in the NPRM arises from Treasury’s desire to reduce the burden of unnecessary work while FIs strive to improve their AML/CFT programs. As such, the NPRM listed the following as a major reform:
“empowering financial institutions to direct more attention and resources toward higher-risk customers and activities rather than toward lower-risk customers and activities.”
Once again, WorkFusion’s screening AI Agents step to the fore when an FI seeks to elevate the riskiest customers and transactions above the continuous noise of massive alert volumes generated by screening tools.
But what can an FI do once it identifies its highest-risk customers? The answer: Look to an AI Agent that performs deeper investigative work around enhanced due diligence, or EDD. Investigative AI Agents represent a leap forward in agentic AI by understanding data and information in context, then applying analysis and reasoning to that context to create a decision.
For example, assume that a US-based manufacturer is considered ‘high risk’ by its local bank, because the company buys raw materials and other manufacturing inputs from foreign suppliers, uses several shipping services, and makes numerous payments internationally. WorkFusion’s AI Agent Edward can apply advanced intelligence and reasoning to perform enhanced due diligence (EDD) about this risky customer. Edward will review the company’s account once per year to make sure the company is engaging in proper activities, even if they are complex. In doing so, Edward would consider multiple, nuanced factors surrounding the customer, its partners and any counterparties involved in payment transactions.
Factors which Edward commonly considers include:
- The various types of products the manufacturer provides
- The possible inputs to those products
- The likelihood that a given supplier is legitimate (based on company’s listed products and services)
- Information about the owners of each company that is a party to a transaction
- The headquarters and major branch locations of all business partners
- And much more
Given Edward’s ability to analyze a wealth of information, put it into context, and make decisions around it, this investigative AI Agent saves its human investigator teammates one to three hours, on average, per case investigation. The end result is faster response times to minimize loss potential to FIs that service high-risk customers.
To learn more, schedule your personal demo of WorkFusion screening and investigative AI Agents today.
