In a move to modernize AML/CFT frameworks, the U.S. Department of the Treasury’s FinCEN has unveiled a proposal under the Anti-Money Laundering Act of 2020.

According to Napier AI, this proposal mandates that AML/CFT programs must adopt a risk-based approach to be deemed compliant, marking a significant departure from traditional ‘check-the-box’ methods.

For the first time, FinCEN’s proposal explicitly requires financial institutions to develop and implement AML/CFT programs that are both effective and reasonably designed, with specific components to ensure compliance. These programs must incorporate a mandatory risk assessment process, aligning closely with government-wide AML/CFT priorities to tailor risk-based approaches appropriately.

In terms of technology and innovation, the proposal puts a strong emphasis on the adoption of Artificial Intelligence (AI) to enhance these compliance programs. AI can drastically improve the accuracy and efficiency of risk assessments by automating routine tasks and minimizing human error, which is critical in maintaining the integrity of financial systems.

Napier AI, a key player in financial compliance technology, supports the move towards a more dynamic and responsive regulatory environment. The company advocates for the integration of AI through its Perpetual Client Risk Assessment (PCRA) technology, which provides continuous, real-time insights into customer risk profiles. This approach helps in rapidly identifying and reacting to potential threats, thereby enhancing the effectiveness of AML/CFT programs.

From Fintech Global –> Full article