An influential consultancy maintains that good tech needs to fight bad tech when it comes to financial crime. finews.asia takes a look.

When it comes to money laundering in an increasingly digitalized world, we may increasingly see technology facing up against – well - other technology.

At least that seems to be one of the many takes from the wide-ranging fraud 2023 fraud and financial crime report (registration required) by Kroll, a New York-based consultancy that operates worldwide.

As part of this year’s report, which was released overnight on Thursday, they surveyed 400 executives in the first quarter of this year and found that 69 percent, or a substantial majority, expected financial crime risks to increase in the subsequent 12-month period. That is not a zero-sum game given that $800 billion is laundered every year, according to them.

Keeping Pace

Technology, which has been critical for internal compliance programs for decades, will continue to play its part, with two-thirds of those surveyed also indicating that they were planning on investing in technology as part of their AML programs. Still, they were doing so even though they had doubts about the «capacity of governments to keep pace with technological change and the increase of criminal activity». 

Kroll also believed many of those same governments would also be relaying expectations that on-site visits by regulators would have to increasingly focus on how technology was used in internal compliance programs.

«Respondents agree that rapidly evolving technology is the top struggle governments face against financial crime, indicating that governments may face an uphill battle,» Kroll wrote.

Near-term Singularity

So, at least for now, when you put two and two together, at least as a human, it looks like the more nefarious technologies out there have a big one up over more palatable forms of silicon. It is not hard to see why.

With all the frenzy surrounding AI chatbots and some purported near-term singularity (Hackaday, freely available), you can easily imagine a bad one doing more damage than a good one.

The areas institutions are suffering most relate to cybersecurity and breaches. In Singapore, for example, 36 percent of those surveyed believed it was the main factor behind increased financial crime risk, far more than things like regulatory enforcement, geopolitical tension, fraud/financial pressure, remote working, and disrupted supply chains.

Increasing Budgets

Given that, 62 percent of those surveyed in the city-state planned to invest in technology and more than half intended to increase their cybersecurity budget.

That is not a moment too soon given that only 30 percent of those surveyed in Singapore rated their current programs as highly effective, with 44 percent of them rating them as just effective.

One of the key challenges most institutions face, however, is data quality. That has posed almost insurmountable problems to large international banks for years given the double whammy of incompatible internal legacy systems built around specific businesses and the manifold differences and discrepancies between the laws in each jurisdiction they operate in.

A Little Bit

Poor data will also hamper the use of AI, Kroll indicated, while noting that more than half of respondents indicated that some form of artificial intelligence had been implemented in their financial crime compliance programs.

«Encouragingly, despite a cautious, and in some cases even alarmist, commentary emerging in the media, perceptions toward AI as part of the financial crime monitoring process are overwhelmingly positive per our survey,» the report stated.

Much of the same holds for sanctions, with Russia’s invasion of Ukraine exacerbating the geographic inconsistencies of individual country regimes that were similar in overall approach although they differed when it came to important details.

Not Just Tech

Given that, sanctions departments had different issues that went beyond questions related to technology, with Kroll indicating that governments needed to work to align laws, guidance, and enforcement while private companies needed better support by way of increased cooperation and access to corporate information. 

That sounds somewhat unrealistic in an age increasingly dominated by questions of war and geopolitical confrontation. But at the risk of sounding overly alarmist - maybe we can get a couple of AI Chatbots to work on that behind the scenes? 

They are unlikely to be able to come up with anything worse than the perplexing thicket of sanctions already out there.