On Thursday, January 30, 2020, the New York ACAMS Chapter hosted an event titled, “Transaction Monitoring Challenges in the Next Decade.” The event was a panel discussion moderated by John MacKessy (Global Head of AML, Blackrock), and included Seth M. Schwartz (BSA/AML Compliance Officer, OCC), David Hazen (BSA/AML Compliance Officer, Mega International Commercial Bank Co., Ltd.), B. H. Moravek (Director, Kaufman Rossin), and Michael L. Spafford (Partner, Enforcement and Litigation Lawyer, Paul Hastings).
Some of the key takeaways from the discussion included that: 1) risk assessments are a key driver for transaction monitoring and are also one of the areas in which the greatest number of issues are found; 2) underlying data (and the interpretation of this data) must be accurate for transaction monitoring systems to be effective; 3) AML programs should engage regulators – particularly if new technology is being implemented – in order to maintain effective and regular communication; 4) transaction monitoring systems must be tuned and tested appropriately (when outsourcing model validation, the deliverable should explicitly state that the model is appropriate for the relevant product, client and geographic risks); 5) transaction monitoring systems should align with the institution’s risk profile; and 6) the OCC’s 2020 priorities have been made public.
Some of the emerging money laundering trends, which transaction monitoring systems could be used to combat are the increased use of digital assets, decentralized finance, and an increasing overlap in cybercrime, fraud and money laundering (e.g., the use of synthetic IDs.) However, some increasingly common concerns that the panelists have seen include a correlation between company growth and compliance failures (due to resource and technology constraints), and communication failures. An example of compliance failure is when a new system is not run in parallel with a legacy system to ensure that data reconciliation processes have confirmed the accuracy of the data flow. An example of communication failure that was highlighted is when inaccurate information is provided to regulators through honest mistakes, which have significant repercussions.