Seeking an edge in the fight against money laundering

Technology is reshaping the modern economy, giving people new ways to pay for goods and services, new assets to invest in and even new jobs. Many economists hope that technological change could be a powerful driving force for productivity gains in the years ahead.

But for those focused on fighting financial crime, technology is a double-edged sword. The growth of data and digital channels has gone hand in hand with the rise of new crimes, from cyber attacks to electronic forms of fraud. Technology also gives criminals new routes to make off with the proceeds of crime. Crypto assets provide a convenient, anonymous means to launder money or to fund terrorist organisations.

This special report explores how supervisors are responding – from closer collaboration to new uses of data and technological tools. Our new survey of central banks highlights how many are turning to various innovative forms of data analysis to improve anti-money laundering (AML) and countering the financing of terrorism (CFT) efforts. Many are also working together to share intelligence across borders.

But there is clearly room for improvement, both in terms of technological platforms to highlight AML breaches, and in cross-border co-operation, which is weaker than domestic collaboration. One-third of central banks that responded to the survey do not use data analysis for AML purposes, and nearly 40% say they do not share data on suspicious transitions with counterparts overseas. Many also report that resourcing is a challenge.

One organisation at the heart of efforts to improve digital AML tools and cross-border collaboration is the Financial Action Task Force (FATF). Marcus Pleyer, FATF president, talks to Central Banking about what techniques supervisors can use to stay ahead in the race against criminals. He highlights how digital tools can boost the efficiency and effectiveness of AML/CFT measures, and may also help alleviate tensions between oversight and privacy laws.

Crypto assets represent a new frontier in the fight against money laundering and terrorist financing. Bernadette Lee reports on the rise of crypto assets and stablecoins, and asks how AML agencies worldwide are responding. There has been a flurry of activity in recent years, but gaps in regulation remain, and crypto asset services providers may need to step up their own efforts.

Ultimately, the battle between AML supervisors and criminals may never end. “As long as there is money, there will be money laundering,” Pleyer notes. All the same, supervisors must do what they can to stay ahead in the technological arms race. 

This feature forms part of the Central Banking focus report, Anti-money laundering and countering the financing of terrorism 2022