Agencies push banks to use AI, other means to fight launderers

WASHINGTON — Federal financial regulators issued a statement Monday saying they want institutions to be innovative in their approaches to meeting their anti-money-laundering obligations and will take innovation into account in their supervision.

The statement — issued jointly by the Federal Reserve, Federal Deposit Insurance Corp., Financial Crimes Enforcement Network, National Credit Union Administration and the Office of the Comptroller of the Currency — called on banks and credit unions to “consider, evaluate, and where appropriate, responsibly implement innovative approaches” to meeting their Bank Secrecy Act obligations.

Artificial intelligence features prominently among the kinds of innovations that the agencies say they would encourage, the statement said.

Andrew Harrer/Bloomberg

“Some banks are being increasingly sophisticated in their approaches to identifying suspicious activity, commensurate with their risk profiles, for example, by building or enhancing internal artificial intelligence units devoted to identifying complex and strategic illicit finance vulnerabilities and threats,” the statement said.

The agencies said they could encourage the use of innovations in a number of ways. The agencies said they would not penalize banks for initiating pilot programs, for one, nor would they penalize banks if those pilot programs ultimately prove unsuccessful. Supervisors also said they would not necessarily apply new or additional sanctions on banks that employ innovative strategies and through that innovation discover previously unknown threads of illicit financial transactions.

“For example, when banks test or implement artificial intelligence-based transaction monitoring systems and identify suspicious activity that would not otherwise have been identified under existing processes, the Agencies will not automatically assume that the banks’ existing processes are deficient,” the statement said. “In these instances, the Agencies will assess the adequacy of banks’ existing suspicious activity monitoring processes independent of the results of the pilot program.”

The statement comes as banks have increasingly been pushing for regulators and Congress to consider changes to the existing AML supervisory regime, arguing that it is among the biggest compliance expenses and in many cases the law and regulations have not kept pace with innovations in the industry. But some of those proposed changes — for example, raising the threshold for filing a currency transaction report from $10,000 to $30,000 — have met with skepticism from certain regulators and law enforcement.

But artificial intelligence also shows some promise for banks hoping both to reduce the risk of participating in illicit finance and reduce their compliance costs.