The growth of AI is likely to create new illicit financial risks as criminals become more sophisticated in their use of these technologies, according to a U.S. Treasury strategy document.
The U.S. Department of the Treasury has released the 2024 National Strategy to Combat Terrorist and Other Illicit Finance, a report highlighting the biggest threats facing financial services companies. These threats include large-scale fraud, powerful ransomware attacks, the opioid overdose epidemic, domestic and international terrorist attacks, corruption, and the misuse of advanced technology.
The 55-page 2024 Strategic Report recognizes the importance of public sector support for private sector compliance functions, leveraging “new mechanisms” such as automation and technological innovation, to combat illicit finance. .
From 2022 onwards, the financial technology space will see significant evolution, including the introduction and adoption of generative AI (artificial intelligence) tools, increased growth and adoption of stablecoins, and the rollout of central bank digital currencies by some jurisdictions and government agencies. “We have seen growth in real-time payment systems,” the report states. “The use of machine learning and (AI) can help the U.S. government and private sector improve data analysis and better identify illicit financial risks.”
Financial institutions may cite this Treasury statement when discussing efforts to incorporate AI into anti-money laundering transaction monitoring systems and sanctions screening solutions. Criminals are also looking to exploit new forms of technology, “including using technology to make fraud schemes, drug sales, and ransomware attacks more effective and profitable,” the report explains. , added that “the growth of AI will likely create new illicit financial risks.” As criminal uses of these technologies become more sophisticated. ”
The report also noted geopolitical developments that are creating significant financial crime risks that banks are working hard to manage. “Russia’s funding of Hamas’s brutal terrorist attacks against Israel and its continued full-scale invasion of Ukraine, including support for the war by Russian elites, poses a significant threat to national security that the United States and It shows how vulnerabilities in the global financial system can be exploited,” the Treasury said in a paper announcing its 2024 strategy.
“Critical moment” for national and economic security
At this “critical moment for our national and economic security,” the U.S. government must “continue to cut off the channels that illegal actors seek to exploit for their own agendas,” said the Treasury Department’s Under Secretary for Terrorism and Financial Intelligence. Brian E. Nelson said.
“We recognize the threat that illicit financial activity poses to national security, economic prosperity, and democratic values, and (we are) committed to addressing both today’s challenges and emerging concerns,” Nelson said. “I am doing so,” he said.
The department added that the 2024 Strategy is a “blueprint of the U.S. government’s goals, objectives, and priorities for deterring and preventing illicit financial activity.”
The document also mentions “key risks” from the Treasury Department’s 2024 National Money Laundering, Terrorist Financing, and Proliferation Financial Risk Assessment. Additionally, the 2024 Strategy states that the United States will “modernize its anti-money laundering/counter-the-financing of terrorism (AML/CFT) regime, improve operational efficiency in the fight against illegal actors, and implement technological innovations to mitigate harm.” It details how to take advantage of recent efforts to utilize There is a risk. ”
Priority recommendations and support measures
The Treasury plan identified four priority recommendations to guide the U.S. government’s efforts. they are:
Filling gaps in the U.S. AML/CFT framework by operating a beneficiary information registry for law enforcement, national security, and intelligence use. Finalize regulations related to the residential real estate and investment advisory sectors. Assess other sectors that may be vulnerable to illicit finance. Promoting a more effective and risk-focused U.S. AML/CFT regulatory and supervisory framework for financial institutions, reducing illicit financing by providing clear compliance guidance, sharing information, and ensuring adequate resources for supervisory and enforcement functions. Make prevention more efficient and effective. Strengthen the operational efficiency of law enforcement, other U.S. government agencies, and international partnerships in the fight against illicit finance, ensuring that threat actors cannot find safe haven. Realizing the benefits of responsible innovation in the United States by developing new payment technologies, supporting the use of new mechanisms for private sector compliance, and finding new ways to leverage automation and innovation to combat illicit finance .
The strategy also includes 15 “support activities” to achieve these priorities. Although support measures are centered on the government, some measures, such as strengthening public-private information sharing and measures to avoid risks, will clearly impact financial institutions.
Two of the last three support measures are likely to directly impact financial institutions and their use of technology. These include: i) supporting U.S. leadership in financial and payments technology; ii) Encourage the use of private sector technology to improve AML/CFT programs and compliance. The final recommended action is to “continue to enhance the use of AI, data analytics, and further technological innovation in government efforts to combat illicit finance.”
