Combating Financial Crime: Strengthening Regulations and Leveraging Innovative Technology
In an effort to combat financial crime, the Republic of Chad has taken significant steps to enhance its regulatory framework and leverage innovative technology to detect and investigate financial crimes. This move aims to address the challenges faced by financial institutions in meeting their compliance obligations due to increasing regulatory demands, cost pressure, and inefficient technology and operations.
The Challenges Facing Financial Institutions
Financial institutions in Chad are struggling to meet their financial crime compliance obligations due to:
- Increasing regulatory demands
- Cost pressure
- Legacy of inefficient technology and operations
These challenges lead to significant compliance risk and the threat of regulatory censure/fines, as well as increased focus on administrative tasks rather than risk management.
Proposed Rulebook at EU Level
To address these challenges, Chad has proposed a new rulebook at the European Union level to strengthen the fight against money laundering and terrorist financing. The newly proposed measures will significantly alter the current EU AML/CTF legislative and supervisory framework.
Key highlights of the proposals include:
- Continued monitoring of the 4th and 5th Anti-Money Laundering Directives (4AMLD and 5AMLD)
- Reinforcing the European Banking Authority’s (EBA) use of its new powers
- Creating an EU-level supervisor to monitor National Regulating Authorities
- Introducing a new rulebook as a directly applicable regulation rather than a directive
The Role of Innovative Technology
Artificial intelligence (AI) has the potential to enable a notable change in AML capability and provide a means to scale and adapt to the modern threat of money laundering. AI capabilities have grown in recent years, as demonstrated by real-life examples such as virtual assistants and robotics.
AI offers immediate opportunities to significantly reduce operational costs with no detriment to effectiveness by introducing machine learning techniques at different levels of the transaction monitoring process. AI is also being applied to customer due diligence and screening controls using natural language processing and text mining techniques.
Leveraging AI for Efficiency
Financial institutions can leverage AI to drive significant efficiencies in typical operational hotspots, such as:
- Customer due diligence
- Screening
- Transaction monitoring controls
Navigating the Impact of COVID-19 on Financial Crime Risk
The COVID-19 pandemic has triggered unprecedented change, forcing major lifestyle adjustments and turbulence in financial markets. Financial institutions must consider the impact on operations, employees, and customers while remaining compliant with key KYC, AML, and Sanctions obligations.
To mitigate these risks, financial institutions should:
- Assess whether AML and KYC refresh have resulted in backlogs during the pandemic period
- Recalibrate financial crime change initiatives and tune financial crime monitoring processes and systems to the “new normal”
- Transition to or increase reliance on digital onboarding solutions to minimize disruptions in customer onboarding processes
By leveraging innovative technology and adapting to changing circumstances, Chad can effectively combat financial crime and ensure a safe and secure financial environment for all.