Special ACFCS Video Financial Crimecast: NICE Actimize’s Stephen Taylor discusses pandemic transaction trends, potential of AI, power of consortium-based analytics

The Skinny:

  • Stephen Taylor, the General Manager of Anti-Money Laundering (AML) for compliance technology heavyweight NICE Actimize, discusses pandemic transaction trends, the potential of AI, the power of consortium-based analytics and more in a special video version of the ACFCS Financial Crimecast.
  • Taylor noted that, at least initially, some banks and securities firms faced alert backlogs due to individuals and corporates pulling money out of stocks and into cash, but that has leveled off.
  • As well, many institutions adjusted quickly, and “relatively seamlessly” to working from home due to web and cloud access to AML technologies and secure bank systems.
  • In recent months, as the pandemic has dragged on, banks have seen certain filings, like customer transaction reports (CTRs), drop, in some cases by nearly half.
  • Taylor also touched on where and how certain technologies can buttress the various prongs of the AML program.
  • On the horizon, the future looks bright, with more powerful analytical tools like AI, automation, robotics, machine learning and cognitive intelligence joining the fight against financial crime, enabling better detection, lower alert volumes and an overall more efficient and effective journey to the finial of any program: the suspicious activity report (SAR).

By Brian Monroe
bmonroe@acfcs.org
July 6, 2020 

Welcome everyone to another special video version of the ACFCS Financial CrimeCast.

In the association’s continuing series to engage top thought leaders in the financial crime and compliance space on tips, trends and tactics to improve results, we get a chance to get a view of pandemic inflection points across institutions with one of the sector’s biggest technology leaders.

Our guest in this discussion is Stephen Taylor, General Manager of Anti-Money laundering (AML) at NICE Actimize, who yielded vital insight on how counter-crime teams are responding to the pandemic, including through stronger technology partnerships, and what criminal trends are changing.

Taylor noted that, at least initially, some banks and securities firms faced alert backlogs due to individuals and corporates pulling money out of stocks and into cash, but that has leveled off.

As well, many institutions adjusted quickly, and “relatively seamlessly” to working from home due to web and cloud access to AML technologies and secure bank systems.

In recent months, as the pandemic has dragged on, banks have seen certain filings, like customer transaction reports (CTRs), drop, in some cases by nearly half.

Taylor also touched on where and how certain technologies can buttress the various prongs of the AML program.

On the horizon, the future looks bright, with more powerful analytical tools like AI, automation, robotics, machine learning and cognitive intelligence joining the fighting against financial crime, enabling better detection, lower alert volumes and an overall more efficient and effective journey to the finial of any program: the suspicious activity report (SAR).

He covered a wide gamut of topics and gave insight on critical questions, issues and trends in a rousing 30-minute discussion, including:

  • What financial crime and compliance trends are you seeing related to the pandemic?
  • What schemes, frauds and crimes appear to be rising or dropping?
  • How have AML transaction monitoring alert volumes changed during the pandemic?
  • Regulators have been focused on effectiveness and in December 2018, exhorted financial institutions to tinker with technology in an invitation to innovation. Have you seen more banks willing to tinker with things like AI, automation and machine learning?
  • What trends are you seeing in the area of CARES Act Paycheck Protection Program (PPP) fraud and what red flags are there to help banks uncover fraudsters before, during and after they lend the money?

Compliance in a time of coronavirus: AML challenges aplenty

The COVID-19 pandemic is still raging across the globe, with more than 200 countries and territories around the world reporting millions of confirmed cases of the coronavirus.

The pandemic has shown no signs of slowing down, contracting in some areas and expanding in others, harming professionals and corporates physically and fiscally.

As a result, the coronavirus has caused a slump in the global economy with full sectors grinding to a halt and those who are employed working from home in a new environment with its own compliance, communication and security challenges.

Not surprisingly, this has created myriad challenges for anti-money laundering (AML) professionals, investigators and regulators and opened the door for new illicit financial flows, including money laundering, fraud and phishing and other scam attacks.

Overall, financial crime compliance teams are having to shoulder more responsibilities – from training teams to making critical decisions on cases – while at home, at times without easy or fast access to colleagues.

Some institutions have trimmed bank staff, including AML teams, even as alerts fluctuate wildly in some transactional areas during the pandemic, rising in the beginning as individuals pull out money to live on and investors flee the stock market, and other transactions dwindling due to a drop in overall transactional throughput.

So that begs the question: Where can new technology help in the AML program?

Some examples include: detection, segmentation, model tuning, predictive scoring, advanced anomaly detection, federating learning, collective intelligence and consortium-based analytics, which holds the promise of improving the detection race across the industry as a whole.

Taylor, though, is cognizant of the current metrics in the fincrime sector.

Of the trillions of dollars laundered globally annually, investigators only seize and freeze less than one percent.

But still, he chooses to be a hopeful realist, an informed optimist.

Rather than seeing the industry’s communal efforts as being a “decimal point away from failure,” as one congressional witness stated, Taylor views this is an opportunity, an incredible chance for improvement.

Feel free to listen to the full interview or jump around to issues pertinent to your team with the timestamps below.  

Tips, trends and timestamps

3:00 – Changing transaction monitoring trends

Working from home, adjustments have been made, “relatively seamless” due to web-based technologies.

Up in investment space, rush to cash. A lot of alert generation at the beginning, but retail bank, fewer cash transactions, fewer alerts, CTR reporting gone down by about 30 40 percent.

Biggest problem for the banks would be managing some of the SBA loans and PPP program. Major challenges for banks for the entirety of the sector in the near term.

5:00 – SBA PPP challenges.

Banks were under a tremendous amount of pressure to get the loans out as part of the multi-trillion dollar Cares Act.

In order to lend quickly as part of the Paycheck Protection Program, which allowed banks to turn loans into grants if companies kept or rehired workers, AML teams had to redirect resources to enable correct compliance procedures to take place during the loan provisions themselves.

Fincrime compliance groups, even under intense pressure to support a faltering economy, wanted to make sure they were doling out the loans properly.

“It’s terrible how fraudsters are using this crisis to pay off their credit cards or buy expensive cars and watches.”

8:00 – Pandemic fraud

Rising fraudulent activity tied to the pandemic, stimulus checks, charities. No new schemes, just new themes.

9:00 – Pandemic transaction trends across institutions

What types of potentially suspicious transactions are rising and falling?

Examples: certain trade-based money laundering schemes are falling due to the overall drop in trade and fewer people are trying to exchange currency, particularly those who would have done so for business or tourist travel.

With fewer cash transactions, more attempts to scam and de-fraud through other means.

10:30 – Have risks flip-flopped?

Is normal business the new abnormal?

Banks need agility in their AML programs. They need to pivot on a dime and prepare better for something like this happening in the future.

12:00 – Where are there alert backlogs due to the pandemic?

Originally, some investment banks, now, mainstream banks tied to PPP loans. The current challenge on the horizon: PPP lending to non-customers.

14:00 – Are vendors updating systems, backend algorithms to help banks adjust to the changing transaction patterns tied to the pandemic?

One answer: faster, streamlined KYC, CDD practices to speed on boarding.

On the horizon: AI, automation, robotics, machine learning, cognitive intelligence. Better detection, lower alert volumes, better, more efficient, effective journey to the SAR.

One example of success: Traditional AML transaction monitoring tuning can easily take a team of eight people weeks of work. But in one instance recently, with one organization, NICE Actimize shrunk a re-tuning down to two hours.

17:00 – Effectiveness and an invitation to innovation.

Regulators to banks and vendors, let’s have a conversation about technology. How can we come together to lower costs, recover the money lost and laundered due to financial crime and better serve law enforcement.

Where can new technology help in the AML program?

Detection, Segmentation, model tuning, predictive scoring, advanced anomaly detection, federating learning, collective intelligence, consortium-based analytics, improve the detection race across the industry as a whole.

Cloud-based technology. More agility, lower costs, but faster implementation.

21:00 – Better information sharing across banks.

You know about Patriot Act Section 314(a), 314(b), but what about 314(c)? A look at the importance of sharing best practices on how to run a compliance program and share information on what passes muster with regulators.

How to spot anomalies across institutions. That goes a long way to helping us solve financial crime and follow the money. Machine learning thrives when there is more data.

24:30 – AI and convergent, holistic training, a recipe for success?

A look at how AI can take away some of the subjectivity, pressure on training, of human decision-making.

26:30 – The sobering reality of current paradigms, effectiveness and the unassailable power of hope

Of the trillions of dollars laundered globally annually, we only seize and freeze less than one percent.

Are we a “decimal point away from failure” as a financial crime compliance industry? Or do we have an incredible chance for improvement?

Even though criminals use technology, we actually now have the technology to spot them better than ever before.

That means more opportunities to counter surging crimes with terrible financial and human costs, like human trafficking.

“I see a real paradigm shift happening.”

Can we go from 10 percent to 20 percent, then to 30 percent?

“That is a wonderful thing for everyone to achieve. That is why we get up in the morning.”  

About the speaker: Stephen Taylor, General Manager of AML, NICE Actimize 

Taylor has worked within the global financial services industry helping firms manage their risk and compliance obligations for more than 20 years. He has held a variety of key roles in product management and business development.

He started his career at Lexis Nexis in London providing legal and compliance information to the top five law firms, known as the “Magic Circle.” While at Lexis, Taylor helped develop several of the company’s initial online research engines and legal data solutions.

After Lexis, he moved to a small London-based startup called Complinet, where he headed up product development for their Reference Services and AML products. The business quickly expanded and was eventually acquired by Thomson Reuters in 2010.

After Complinet, Taylor joined Wolters Kluwer and became the Global Market Manager for their GRC product (OneSumX).

Taylor’s last position before joining NICE Actimize was Chief Commercial Officer for MyComplianceOffice (MCO).