As a senior leader within my organization, I am always thinking about ways to keep my practice and business in growth mode. After the Great Recession, I made it my mission to make my team’s business model as recession-proof as possible. However, after a few years, I realized a second front existed in my mission for continuous growth. The Great Recession started a massive shift in the way we conduct our personal finances and perceive financial services. We now call this shift the “Fintech” industry.1 However, the speed of change in technology is so phenomenal that I have to figure out how to keep up and fight off obsolescence. What will the staffing industry, the employment market and our job culture look like in the next five, 10 and 20 years? I want to be ahead of the change, if not part of it, because the taxi driver was sucker punched by smartphones and the hotelier is on the defensive now that we all can provide suitable accommodations for guests. How much longer will banks and retailers need their brick and mortar branches and storefronts? I truly believe change is good, especially when we all benefit from the results, such as more convenience and connection, better communication and greater access to data and services. However—like everything in life—with the good comes the bad.
How is technology affecting anti-money laundering (AML) and compliance professionals’ requisite skillset and employment opportunities? Right now, financial crimes compliance (FCC) and sanctions technology is relatively easy to understand. Most banks and financial services firms have adopted some sort of transaction monitoring (TM) system and Office of Foreign Assets Control filter, have a negative news and know your customer (KYC) vendor, and possibly have an analytics team that uses tools such as Tableau and data visualization platforms. Although the New York Department of Financial Service’s (NYDFS) Rule 504 says regulated institutions need a TM system, “which may be manual or automated.”2 Good luck to the Bank Secrecy Act officers and sub-certifiers who do not have an automated system that can be properly assessed and from which data can be validated constantly. Technology is vital for all AML programs to function, and the regulators have made that clear. But human supervision and validation is mandatory. Jeffrey Alberts, co-head of the Financial Institutions Group at Pryor Cashman, says, “I do not think that regulators will be open to the human element disappearing, at least [not] in the next decade. However, regulators already are starting to express openness to the increased use of artificial intelligence (AI) in AML because criminals who launder money are increasingly using technology to make it more difficult to identify and prevent money laundering.”
Remember, the NYDFS also requires all covered entities to follow cybersecurity regulations and to “provide annual proof of compliance.”3 The need for strong digital and cyber protection, reliable and valid data, and efficient monitoring and filtering have made technology an inherent and invaluable part of all AML and FCC programs. However, the human element is indispensable in making the system successful and productive. I have observed and witnessed the evolution of AML technology over the last decade and the positive impact it has had on the FCC community, which has grown both in size and popularity.
The Near Future
The Fintech and Regtech industries are hotter than ever and are on a mission to change the financial services industry. The growth of both industries will not stop any time soon as the fight against crime, terrorism and money laundering becomes more expensive and complex. However, at this point in time, FCC and compliance professionals should not worry about losing their jobs en masse. Conventional financial institutions move at a different speed and will implement new technologies cautiously and after long deliberation because of the potential costs of changing the status quo, the (sometimes) incongruent opinions of our country’s regulatory bodies on new technology and the uncertainty of whether new technology is actually better. We can create a picture of our near future by analyzing what some futurists call the “four building blocks of change”—resources, technology, demographics and governance.4 As a whole, these four blocks create the “trends” of our current and future circumstances.5
Our global demographics (we will assume all necessary resources are available) are showing trends that are in line with growth or, at least, steady human capital demand in the FCC employment market. With such a low unemployment rate and baby boomers set to retire now that the Great Recession is over, many industries are having a tough time finding the best talent. The best candidates are receiving multiple offers and getting promoted with higher raises at the same time. The U.S. Department of Labor has measured the demand for talent: “On the last business day of November , there were 5.9 million job openings, little changed from October .”6
The same goes for the U.S.’ system of governance (the three branches, regulatory bodies, etc.). The federal administration and state regulators have shown a strong tendency to fine financial institutions and sanctioned countries, regions and individuals, which, in turn, provides the FCC community with more challenges, responsibilities and opportunities. Overall, for the near future (three to five years) the “four blocks” predict a strong employment market for FCC professionals. The one sign of decline is in the demand for bank regulatory professionals. With a federal administration that is anti-regulation, anti-Consumer Financial Protection Bureau and anti-Dodd Frank, there are signs of a slow down in the need for non-AML compliance professionals.7
Technology, now and in the near future, is having a positive and ironic impact on the AML and compliance employment market. Did you attend the 2017 ACAMS Conference in Las Vegas? One of the many interesting features of the event was the focus on technology, cyber and data. For example, here are terms used in the titles of some of the sessions: innovation, quantitative metrics, cybercrime, cybersecurity, algorithms, cyber war, emerging technologies, data mining and cyberthreat.8 But I cannot leave out the buzzwords most used in my conversations at the conference: artificial intelligence (AI) and machine learning. I was intrigued by the differing opinions people have on when AI will replace the human element of AML programs, if true AI tools exist currently, if vendors are taking advantage of companies by characterizing their product as machine learning and AI, and the actual importance of AI and machine learning to a regulator-loving FCC program. Jason Chorlins, a principal of Risk Advisory Services at Kaufman Rossin, says, “Incorrectly implemented technology has become a burden on AML programs as automated monitoring systems have been producing large amounts of alerts resulting in a high false positive ratio. Regulators are already open to the idea (of AI and machine learning), but the concern I see is the overreliance on such systems to replace the human element in determining what activity is deemed unusual and/or suspicious.” His opinion and observations are not uncommon. A substantial proportion of the AML community still has a suspicious view of technological advancements and implementations, while being impatient for the next great automation tool.
Lastly, the ACAMS Today Article of the Year in 2017 was When Two Worlds Collide, which describes how blockchain and cryptocurrencies are affecting the financial services industry, law enforcement and all AML professionals. In the article, the authors conclude that “what is clear is the need for knowledge and education in this space, not just to make sense of this new technology, but to compete in a world of AML that may see drastic change.”9 The crypto, blockchain and emerging payments industries are already creating more FCC and compliance roles than ever because they fall under the “covered entities” umbrella like plain old money services businesses and banks. So, Fintech and Regtech firms are ironically adding to the demand for human capital while chugging away to the tipping point, where and when automation changes everything.
The Distant Future
Now, we come to the crux of the matter: How will technology affect FCC and compliance in the distant future? Well, the simple answer is that all banks and financial institutions will be Fintech firms that will use Regtech to maintain compliance. Sandeep Loshali, a vice president in the Transaction Monitoring Optimization Group at the investment bank BNP Paribas, elaborates on this point: “Banks’ focus has been on customer satisfaction with more and more customers using the latest technology. Banks will need technological support to do business and [to] satisfy customers’ needs. In order to do so, banks will start operating more in the form of financial technology companies.” As a result, Loshali has seen a “drift of resources from investing time in performing review of alerts or suspicious activity to building surveillance technology platforms” in order to fulfill regulatory needs. So, both business success and AML prevention are predicated on successfully implemented technology in the future.
Many banks are conducting look-back projects that require large amounts of human capital. In the next decade and beyond, automation will replace much of this human capital. Remediations will need only project managers, developers and coders, and seasoned AML professionals that can communicate with them to tweak the systems. Machine learning, AI and automation will eventually conduct the alerts clearing, ultimate beneficial ownership/know your customer accounts remediations and lower level business-as-usual responsibilities. Junior- and entry-level roles will still exist but they will have to involve learning how to maintain automation. Juan Llanos, from ConsenSys, says, “If AML personnel do not re-educate and retrain themselves, there will be no possibility of ‘shifting in responsibilities.’ They’ll simply be displaced. Yes, it will all move to the engineering shops.”
The following four building blocks of change predict a much different future:
For the sake of this article, we have to assume that our global society will have the resources to function properly. But a lack of water in major cities like Cape Town, South Africa are scary and put things into perspective.10 Elon Musk might need to continue his efforts to colonize Mars, so we have an “‘insurance policy’ against catastrophic threats to humankind.”11
The planet currently supports more than 7 billion people. The U.N. predicts 11.2 billion will inhabit the planet in 2100.12 Can our global economy employ enough people while we continue to become more dependent on automation? Yes, it is possible, if we deliberately and consciously make the decision to implement technologies in all industries and simultaneously figure out how to maintain human capital needs. In addition, we will have to make sure we create a better system for educating people and teaching skills.
Although, our current federal administration is fighting globalization caused by outsourcing, the North American Free Trade Agreement, the Trans-Pacific Partnership and immigration, the world will only become more integrated and borderless. The internet, smartphones and social media will continue to increase globalization. Our rule of law will have to bend to globalization’s will, which will make the global financial services industry, as a whole, more integrated than ever. The EU is a good example of unification and a single market leading toward more regulation (GDPR, MiFID and PSD2, for instance). More regulatory obligations will create more complex compliance risks, which in turn will drive the need for better and more sophisticated technology. Llanos presents another possible scenario: “In 2050, I hope humans have evolved away from political structures that require surveillance and control, and focus on collaboration, safety and well-being, therefore precluding the need to monitor for sanctions and financial crime.”
We all seem to want more from our current data or access to more of it. Knowledge is power. FCC and compliance programs in the future will revolve around collecting, analyzing and utilizing accurate data to make what Nikhil Aggarwal, advisory board member of Amberoon ( a Regtech provider of advanced AML analytics), calls “proactive decisions to deepen existing client relationships and de-risk and exit identified clients.” With time and effort, the optimization tools that already exist will become true AI that learns and predicts behavior to both uncover and prevent financial crimes and drive business, all at the same time. Point being, this technology will be more reliable, efficient and cost-effective than human judgment and capital.
Technology has and will have a major impact on how our entire society operates and lives. Technology will affect the jobs that we have taken for granted and have seen as inherently human. In addition, automation will change our employment culture and the gig economy will become just as embedded in our way of thinking as being a “company man” was a half-century ago. Change is inevitable and, I believe, inherently good. In the near future, technology will work alongside the human element and not replace it. But in five to 10 years (and definitely in 50 to 100 years), FCC will see significant and drastic change. Chris Siddons, senior director in Risk Solutions at LexisNexis, says “New technologies will overlay disjointed platforms and consolidate data to enable machine learning and automation to drive efficiencies and limit expenses.” Technology will become more accurate, precise and cheaper than human capital.
Technology and automation can still evolve in ways that both replace roles while creating new ones as it has done in all previous industrial revolutions. Education systems and pedagogical philosophy (at least in the U.S.) will have to change to keep future generations and companies competitive. In an article about automation and jobs, Brian Heater says facilitating the process of new technologies creating new jobs will “require some massive investments in education, both on the part of the corporations looking to move valued employees into new roles and an education system preparing workers for the real world.”13 For now, as automation organically grows, AML and compliance professionals can be in control of their future by being cognizant of technological change, its increasing speed of development and its effect on their requisite skillset.
In conclusion, here are some pointers for preparing yourself for potential change:
- Ask yourself a few questions and embrace the hard truth. Does your current job and profession “fight” technology? Does it work alongside technology? Or, does it involve creating technology? If your answer is yes to the first question, and you are currently waiting for an app or new software to replace you, then you should figure out what to do next. If your answer is yes to the second question, you have to ask yourself if you will be replaceable at some point. And, if you are creating technology, more power to you.
- Stay on top of the trends. What part and role do you play in your FCC/compliance program? What technologies are you using? Are they state-of-the-art or old and obsolete? Do you see downsizing at other institutions of people with your role? Go to ACAMS conferences, seminars and events and network with your peers. Also, never stop learning. You will be blindsided if you think you know everything.
- Be aware of new technologies. Try your best to understand what blockchain is, what cryptocurrencies are, the differences between the two, and how Fintech and Regtech companies are trying to disrupt and enhance the financial services industry. Most importantly, be aware of new technologies before they become mainstream. Sign up for Google Alerts, start reading magazines and websites that focus on the technology industry, and work with your teammates who are analytical and data-oriented. As the authors of When Two Worlds Collide emphasize: “This is the future of AML and it is important for AML and law enforcement professionals to keep up-to-date.”14
- Do not worry, embrace change, and focus on skills and abilities. Do not be alarmed by the alarmists. Machine learning and AI tools will not make you obsolete. The human element in FCC, AML and compliance is still too strong. However, when technology grows at such a rapid pace, the best way to beat the fear is to stay active. Learn new computer-oriented and data-driven skills, network, stay ahead of the mainstream, and continue to reflect on where your job, profession and role stand in regards to technological change: Is it in the way or along for the ride?
- Sanjeev Menon, Zach Plotkin and John Liberatore, “FinTech: Taking the Leap,” ACAMS Today, August 2017, https://www.acamstoday.org/fintech-taking-the-leap/
- Chris Recor, “Understanding the New DFS Part 504 Regulations and the Associated AML Program Testing Challenges,” ACAMS, https://www.acamstoday.org/wp-content/uploads/2021/03/Understanding_the_New_DFS_Part_504_Regulations_C.Recor_.pdf
- “Mandatory NYS Cybersecurity Regulations for Financial Services Companies–Summary,” CitrinCooperman, http://www.citrincooperman.com/uploads/1592/doc/NYS_DFS_OnePager.pdf
- Cecily Sommers, “Think Like a Futurist: Know What Changes, What Doesn’t, and What’s Next,” October 2012.
- U.S. DOL Bureau of Labor Statistics, “Economic News Release: Job Openings and Labor Turnover and Summary,” January 2018, https://www.bls.gov/news.release/archives/jolts_01092018.pdf
- The federal administration has too much on its plate to repeal all of Dodd-Frank, but I suspect the Volcker Rule will still have a target on its back after speaking to Swap Dealer CCOs and Dodd-Frank experts.
- Joseph Mari, Peter Warrack and Leonardo Real, “When Two Worlds Collide,” ACAMS Today, September-November 2016, https://www.acamstoday.org/when-two-worlds-collide/
- “South Africa: Cape Town Slashes Water Use Amid Drought,” BBC News, January 2018, http://www.bbc.com/news/world-africa-42731084
- Blair Reeves, “Elon Musk is Wrong – We Are Not Going To Colonize Mars,” Medium, October 2015, https://medium.com/@BlairReeves/elon-musk-is-wrong-we-re-not-going-to-colonize-mars-43e363726ef2
- United Nations Department of Economic and Social Affairs, “World Population Expected to Reach 9.7 Billion By 2050,” July 2015, http://www.un.org/en/development/desa/news/population/2015-report.html
- Brian Heater, “Technology is Killing Jobs, and Only Technology Can Save Them,” TechCrunch.com, March 2017, https://techcrunch.com/2017/03/26/technology-is-killing-jobs-and-only-technology-can-save-them/
- Joseph Mari, Peter Warrack and Leonardo Real, “When Two Worlds Collide,” ACAMS Today, September-November 2016, https://www.acamstoday.org/when-two-worlds-collide/