AML/CFT Regtech: Case Studies and Insights Volume 2

On September 25, 2023, the Hong Kong Monetary Authority (HKMA) released a report titled AML/CFT Regtech: Case Studies and Insights Volume 2 which is primarily addressed at financial institutions to keep them up-to-date on the use of RegTech in the banking sector. This report showcases real-world examples of banks using RegTech to enhance their Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) efforts. It covers more advanced AML RegTech solutions, building on a previous volume from January 2021, highlighting the progress made by banks in adopting AML RegTech in just two years. The report features four main areas of Regtech implementation, including:
– real-time fraud monitoring which primarily involves rule-based monitoring of accounts and transactions based on typologies and red-flag indicators, but may also be combined with machine learning;
– machine learning for transaction monitoring alerts handling which involves the training of alert systems based on historical transaction alerts and their likelihood of being false positive;
– natural language processing for media monitoring which involves the automatic monitoring of news articles by applying key search words such as “crime” or “fraud” or “bribery“ and related words to detect potential alerting news as regards customers or potential customers; and
– analytics with a Single View of the Customer which involves the deployment of intelligence-led analysis to develop a risk rating for clients across a firm’s locations, branches, subsidiaries, or group.
To conclude, the HKMA notes that it remains committed to combating money laundering and the financing of terrorism in Hong Kong and that it will continue to engage with banks and other stakeholders to enhance monitoring and detection.