Financial Crime in Economy 4.0: Emerging Trends in AML and Cyber Security

[Music] hello everyone and uh thank you for attending this panel as you know from the previous uh discussion uh anti anti-money laundering is a serious topic it's um it's something that you know needs exploration I think that's what we have our te guests for uh to to Really delve into this topic so I'll get right into it and you know especially understanding what we're talking about when when we speak of anti-money laundering in today's world with the inclusion newer technology U just like with all technology it's a double-edged sword with the new Solutions you also get new problems and uh I'll pose that question first in terms of what are the new uh anti-money laundering sorry what are the money laundering uh uh methods that are being Incorporated today given the new technology that's out there I mean from I remember back in the day there was I keep giving the example the Nigerian prince is sending an email trying to get his assets out of the country and you need he needs your help uh to be able to move those assets for him and then there goes your money so um yeah how's that changed since then I'll put yeah thank you very much uh Sim really pleasure to be here I think we are seeing an increasing number of obviously uh cyber crime um so identity theft is quite uh common now and a few interesting things that are happening with the technology you know now you have generative AI um so you can pretty much build with fake videos and voice recognition everything else uh to uh mimic somebody's uh identification and controls uh you can actually uh there have been instances where people have been called again you know as a police I'm calling from the police uh your uh you know something has happened and we need your details and you provide the details uh a few of those have been happening in in Australia and Western Europe as well where people are actually calling with uh the Deep fake voice uh mimicry and then you'll call somebody's mother and you'll say you're in the children's uh voice and then you say oh Mom I need some help can you give me this detail that detail and people cannot figure it out and then suddenly you divulge the information and then you find out half an hour later that your bank account is no longer what it used to be so uh so a lot of that is happening I think the the the key thing is education definitely you know we have seen uh and I can give a personal example where one of our uh uh colleagues was asked by me which I never did to go to the Apple Store and uh uh basically generate and and get cards worth of 10,000 because I want to distribute those cards to my uh my colleagues as a gift um and that person actually went to the Apple Store uh but they had the the the the smarts to actually call me and ask me whether and ask for that so uh so a lot of this is happening um and people are getting very very uh uh sharp with that so education is I think very very important doesn't matter what technology you use if people are aware of what is happening and what they need to ask it definitely helps and it seems like as well that they're able to get uh information that's out there you know with data to get little bits of information about you just enough to convince you that you know they are the authority that they're presenting as and then to collect more of the information that that seems a bit different out there as well because uh with the amount of data that we're putting uh you know out there on the internet and uh you know every time like you log on somewhere and that it says oh do you volunteer you know your data rights to an extent I always I mean you can't read you know so many pages of uh you know legal language to say yes or no but a lot of the time that's becoming public information and that can be used against you and um I'm wondering if there any other examples in terms of uh with the decentralization aspect is that contributing to this uh you know to the problem of moneya laundering where things can be done remotely it doesn't um you mentioned the calls are there other ways as well you uh just exploring you know to understand more of what we're talking about when we say anti moneya laundering in today's world oppose that to the other guest definitely um s thank you very much so from a decentralization perspective I think coupled with everybody's anxiety and and urgency for Speed in Services speed in capability efficiency in whether it's your financial services whether um it's turn around time to open a bank account to process a payment Etc speed is a catalyst I think of what we all looking for in today's day and age and when you marry decentralization with the consumers um expectancy of speed I think there is a gateway and a sweet spot in between where the opportunity comes in for compromise of um control Frameworks that have traditionally been in place place to work as efficiently as they have been before the turn around time for identity verification checks is much swifter we now have instant payment where payment is processed and settled within 10 seconds the ability to do proper due diligence to be able to understand whether that's legitimate or illegitimate transaction goes away and you can only do it after the fact in in all reality so I think with that that speed is is is one impediment if you like to us relying upon the uh historical capabilities that have been in place before and then for back to the question around decentralization um most of us today have got your Traditional Bank account and then you've got a mobile wallet sitting on your on your phone and then you may have a crypto wallet and then you may have a a a a third or fourth maybe foreign bank account back in your home country wherever you you you reside and so that fragmentation of your finan Financial portfolio gives uh any one of the providers that servic you an inability to understand the totality of your profile and properly understand whether or not you bring risk to the institution and and and with that decentralization creates the opportunity for you as a consumer or an illicit consumer to to paint the picture that best suits them to the institution and and um the financial institution I'll be that they're doing uh to the best extent possible s due diligence is compromised by not having a full picture because of the decentralization exactly and um then leaving on the side of Regulation because it seems like the to be able you know take the complete picture there's a need for Partnerships there's a need for um even keeping up with the technology itself and understanding how it works because from what you were saying it sounds like still the same problem as the one that it's always been human error right that's where the uh the exposure is you know when it comes uh you know whether getting information from an individual or um you know something that's being overlooked so I'll direct this to Tim um how do you see the regulation keeping up with the advancement of these you know Technologies which seem to be rampant and uh being applied then how does how do Regulators keep up uh how are they monitoring the situation to develop the the counter tools for it yeah thanks Salen um I'd just like to stop by saying thanks to all of you for being here um you could be downstairs listening to Kevin o right now but you chose us and I appreciate that um so as a regulator the way I I look at this is um you know we all know that historically regulation struggles to keep up with technology um techn technological uh developments happen quickly but the legislative process is slow uh and even once you have regulation there's an inertia around trying to or thinking about amending the the legislation um and a good example of uh where I think uh We've failed to regulate uh an emerging technology at the moment is social media uh if you look around the world there's there's very little regulation of social media um you know there's no requirement for social media companies to um be transparent about their algorithms for example there's no age gating for minors and things like that but um we I think we are making progress in this when it when it comes to financial crime we although we take traditional regulatory tools and methods like kyc transaction monitoring um CDD and so on and try and apply that um to uh Financial companies that are using Tech um we're also looking at at new methods and and new ways of regulating this it's an emerging space but we when it comes to digital assets for example we have the travel Rule now which requires uh beneficiary and and originat information to travel with a digital assets transfer um so we are moving and adapting there's always probably going to be a lag um but in order to tackle that I think we need um people on the technology side to consider perhaps a career change um and and moving to regulation moving moving to being policy makers legislators or at least working with us to help us understand these new technologies um because we can't design and build the right regulations um to try and keep up with the the new risks and harms that they pose unless we understand the regulations and I'm curious as well about uh with firms and uh having like the department necessary to be able to have this oversight and you know incorporating the uh talent and skills you know to be able since it seems like this type of skill set it's as you said it's it's new it's uh you need something that combines different skills from you know whether you know finance and and security um is that something that you're working on as well like say you know working with companies to say this is the type of talent you need this is the type of um um I guess of structure you need in in a company you know to be able to effectively uh keep an eye out for such things um we're we're not in in ad GM saying that you at this stage saying that you need to identif um identify and hire certain kinds of talent um from a regulatory perspective uh what what myself and and my colleagues are trying to do actually is is look at um how do we skill up ourselves um in the best way to to oversee this and so um we're using a combination of approaches from um our own training um and and training on uh technology to hiring Tech experts and training them to be Regulators uh it's it's through a combination of these means and from the talent uh side of things as well um that always seems to be the um the area where it's lacking in terms of you know as you said that it's something how do you transfer those skills I mean how important is it to find the necessary Talent uh to be able to address these cyber security issues given that the technology is something that's still advancing and you know it's not something that you can learn in school and University because it's still too advanced that you know by the time it gets to University it's going to be old information so how you really bridge that Gap in getting the right people with the right talents to address these cyber security or moneya laundering issues I'll put that out there to the yeah yeah yeah so um thanks again for being here everyone else said I think um on the talent side it's interesting because a lot of the people that people like myself and Chan Z and everybody else on this panel are trying to hire they've got an option now I think we talked a little bit about um about effect the armchair fraud you know where people can do things without being accountable and therefore you can have people work on the other side and earn just as much money if not more money and so there's a big challenge there where when you're hiring people the level of DD that you have to do on them to begin with then continuously you're almost looking over people's shoulders um pretty much all the time when they're working on systems that are trusted by some of the biggest banks in the world you need to make sure that um they stay on the right side of the law which is very very challenging I think just something else as well in terms of the conversation from earlier on information social engineering I think as Jan was describing where people are tricked into doing stuff it's interesting um that combined with regulation policy because I read a stat just last night I Was preparing for this talk I thought I better do some interesting reading to give people something useful there was a study done in the UK by an organization known as cyas which um is the fraud Organization for all the banks that sh to share information one in seven British adults 14% of people um admitted to committing fraud first party fraud so now that we're all aware of the fact that regulators and policy makers are reimbursing us and we know that fraud is going on and it's it's proliferated people are going well you know what I'll have my own shot arm chair fraud I'll buy something and I'll then call the bank up and say I don't recognize it and what's happening as a result is the burden then is coming back to the institution to have to prove that this is this was you so you did this transaction and AI I guess is a is an interesting thing means many things to many people um but there's one thing detecting if this is an impersonator because most of us when we think about fraud we think it must be somebody that's taking over Z's account that's just per performed that action or executed that transaction but what happens increasingly now is that a lot of our clients are coming to us and saying we don't believe that this was a fraudster we think this was the real person but help us prove that this was the real person and so there's a lot of introspection that has to go on with this and you know when you set policies and regulations the emergent behavior from that it sometimes can be not what you expect it to be so definely if I can jump in here so so I think a couple of things we we talk about right so there there are three aspects here one obviously uh the the technology has to get to a point where most of the institutions are not significant enough to deploy AI uh currently there a large institutions can smaller institutions cannot uh deployment of for example AI but if you have large data sets to uh what Z are saying uh built algorithms that can detect actual fraud versus sort of you know a crime that makes a big difference this also comes to the point of getting people together uh how do you hire the right talent talent is the the era of cheap money what has done to actually Talent is that everybody has become extremely EXP expensive and it becomes very very difficult to to hire and retain people and I'm sure everybody has the same challenges so you put that together with the fact that people sort of saying okay you know there's a there's top 1% of the world doing really really well and the the income gap is is increasing which gives people more incentive to say okay well you know I can kind of commit a little bit of Fraud and your morality becomes a bit relative um so these things are happening um and then you have these Technologies about Quantum Computing um and and AI so uh if you can and I think we'll have to manage the access to quantum computers otherwise you'll have a significant disaster on your hands at least in my humble opinion um because you can break the encryption in eight hours the highest level of encryption in eight hours can you explain that actually like what is you know Quantum Computing and how that that would be a game changer in in the field if it gets to that point where that's accessible ah yeah so so basically Quantum yeah in simple terms Quantum Computing is very simply a a so so if you can do a calculation one at at at one time with defined parameters you cannot do so there's a capacity issue but if you can replicate basically and that's what quantum mechanics is you can replicate the same thing in two different places two two things appear at the same time in two different places and you can run simultaneous uh uh uh calculations on both sides but where with different or corresponding results that's what quantum computers allow you to do so the ability to process large very very large sums of data very very quickly uh will give you uh uh the ability to to break anything build anything and then with generative AI so so I can create Tim if I have access to a quantum computer and potentially Tims web Persona in about two hours without without not for you I it's to create a human being and a personality but that's a very scary thought right so it's an access issue but again if you can create something like this if you can break everything you can also build something to to protect against that so a lot of this is is happening and and I have children so I'm actually concerned about my kids because they're going to grow up in a world where there's a lot of things that are going to be happening and we need to educate them and when it comes to regulation Regulators can only provide principles the moment Regulators get into actual uh uh uh compliance with very specific action items you are asking for troubles because then you have to keep up with the technology and and I don't think it's always going to be outdated technology is always going to be further ahead than than regulations yeah I mean those were like uh yeah I think that is a very scary concept not you directly Tim but yeah just being able to create a you know personality that can the examples you're described earlier to get that information that adds more you know to the uh trust you know that on the other end of the call as we generally just do everything remotely give you know that type of information and what Zia was saying as well uh about um even who you hire matters I I was I was asking about particularly like do they have the skill sets to do the job but then that's another thing can they walk out with information and you know uh where's the protection you know against that and also on the consumer side they're committing fraud or they've the put the the possibility to and I like how you said said relatively I think that was a very nice euphemism for a lot of people are taking advantage of that and uh whatever loophole they can find you know um to to take advantage of the system and then of course when they can't prove it you know with the AI That's that exists at at the time then they just have to cover the costs and that contributes you know um to the to financial crime so it seems like all in all together that there's uh there's a lot of Education there's a lot of uh systemic development that needs to take place you know with incorporation of AI and I wanted to understand a little bit like as you know like um with the news of FTX and you know uh this week you know with binance in terms of what does that signal to the industry when you hear uh these types of uh I mean because that's is it the human side of the corruption that's the issue the regulation that didn't catch up in time you know when talking about these uh types of business practices uh what what message does that give you know um you know to uh yeah to the industry as a whole I'm going to say something very controversial on this right so greed drives a lot of stuff um in case of FTX particularly in crypto especially the the original days right everybody was speculating um and if you if I ask someone that if I can um make you a th% in a month you know that in itself should should give you pause uh to do that and then if I don't give my100 to a corner bank that I don't have trust in how am I sending $10,000 to somebody in the Bahamas right so when you so so again I think people are unfortunately not taking responsibility for their own actions as well you can't really just look at the governments and regulat and say by the way you should be fixing this all new businesses if you look at comparable things I mean what happened with with Leman and Bear Sterns you know that's a very wellestablished industry well established you can't really say okay wow because FTX everybody is you all The Regulators are to blame um personally I wouldn't trust a guy wearing shorts in a conference if I came here wearing shorts and and everybody else was in a suit I would not give that guy money so there signs everywhere because we're getting old should warn a tie at least you know to improve that image but no I see what you mean and can can I jump in on that point because I it touches on something that I I've been thinking about a lot lately and that and that's corporate governance and I think legislation regul will always struggle to keep up with technology but something that's that's not new is Corporate governance it's always been around and if you look at all these failings among other things they were massive failings of corporate governments and so um in in a in a world in which technology is is advancing as fast as it's advancing and where we may not have the regulations yet or we may never have the regulations that are sufficient to regulate this uh one of the fallbacks that we can think about is I think is is Corporate governance um what happened to the board in these companies wiard FTX LeMans you name it but I mean on that point I mean how do you actually Implement you know proper corporate governance then uh because that was going to be my follow-up question in terms of yes it's not all on reg regulators and you know regulations that exist because as we had mentioned uh the technolog is going to be more advanced it's going to be implemented and practice you know U well before you know those are um uh put in place as you mentioned social media that's something that's still not regulated today and that's been you know around for while so how uh how would you advise uh you know whether you're talking to the consumer whether you're talking to the person you know in a firm or or a company uh how how do you manage this and that the balance of the two well well when it comes to firms or just corporates conscious run at a time as well but you need people who are on the board for example non your non XX that type of thing to understand the business a lot of the time you have on board money people who gave you some cash and they want to join your board but they don't understand your business whatsoever and so sometimes that can help because it lets you go off and do things that you need to get done but in other instances I think in the from a governance point of view you need people who understand the ins and outs of what you're doing to what the guys that were on the previous uh discussion were talking about otherwise there's BBB you know baffles brains basically a lot of that goes on right so yeah yeah I I like the and I believe you touched on the talent aspect as well if you want to chime in there yeah but if I just pick up on the corporate governance aspect I think um transparency of information um is a catalyst to proper corporate governance so I mean at large most most entities and most corporates that exist want to do the right thing and stand for the right thing and and put in place ethical boards and people of good standing and and and so at a decision making level whether it's at a sea Suite or at a board level within uh most organizations and entities that decision making for the most part seeks to be ethical it seeks to to want to make decisions that are in the best interest of running a clean business and contributing to the greater good of society but that can only be done with transparency of information and often there's a lack of information and a lack of understanding and I think the convergence of information between Regulators the public sector um law enforcement officials and the private sector in order to to to harness the collective understanding of what it is we're dealing with so that um uh decision makers are have access to to more intuitive information is is what will help to to to Foster that transparency and help to Foster a a way in which business can can make sure that they are on the right side of the law and they're not contributing to facilitating elit activity um I think that's one thing if I come back to your your question on on the talent um essentially what we find I mean I call myself a little bit in way from the dinosaur age right if you think about from a financial crime uh cont uh compliance professional perspective I've been doing this work about 20 years now and I come from the era of of of lawyers that were selected to do this right and and for 10 years post my time when we looked for the pool of Talent on who's going to be Financial crime compliance professionals we looked in the pool of of of lawyers and I think in today's day and age if you guys are just looking at at at low graduates as your pool of talent for uh to help you fight Financial crime you're looking in the wrong place right you you you need to be looking for data science experts Engineers technology experts AI experts and I think the the the talent pool and the capability and the the skill set that is needed to better understand um the the the evolution in the fundamental predicate offense say that that threaten our our institutions is what we need to think about differently and and so from a talent perspective we see a lot of recycling in the market of uh uh compliance professionals moving from one entity to another to another that doesn't necessarily bring about change and it doesn't make the ecosystem stronger I think the introduction of new capabilities and new new skill sets is is what is needed for us to become better at fighting this yeah I think a key thing that you said was about the you know even before the rules and the laws can you know come in place it's the culture of corporate conduct establish and that needs to be understood in practice by everyone to ensure uh trans transparency ethical practice and uh there's so much more that we can you speak on this but we are out of time so I just want to thank all our panelists for it's very insightful conversation and uh thank you for attending I appreciate [Applause] it