Consortium AML – Driving a Revolution in Financial Crime Compliance

CordaCon 2021 included a presentation by NICE Actimize – a world-leading pioneer in helping corporations worldwide prevent financial crime, combat fraud, ensure they’re fully compliant and enhance their safety and security. Over 25,000 organizations in more than 150 countries, including over 85 of the Fortune 100, use NICE Actimize solutions. At CordaCon, NICE Actimize discussed its Consortium AML (Anti-Money Laundering) solution – a ground-breaking approach to revolutionize how businesses fight financial crime, harnessing distributed ledger technology like Corda.

The challenges

As NICE Actimize highlighted during the session, it’s estimated around 2 to 5 percent of all GDP globally is criminal wealth. That’s around US$3 trillion US dollars being laundered by criminals through the financial markets and financial system every year. Generally, the system identifies about 1 percent of this – meaning 99 percent of all illicit wealth gets through to the criminals themselves. The message is clear: a different way is needed to tackle financial crime. The problem is that, currently, everyone operates in silos. Each bank has its own crime solution – and does its own detection, investigation and reporting to the relevant enforcement authority. But seeing the criminal behavior through only one lens is not is not enough. NICE Actimize is constantly seeking and evolving ways to make financial systems safer. And it could see the solution lay in a convergent consortium approach for AML – one that R3’s Corda is ideally placed to support.

The solution

A Consortium approach to AML essentially consists of three elements:

• Information sharing – banks and other interested parties sharing information between them to help understand the criminals and pinpoint new and emerging threats. Historically this sharing has been paper-based or via phone calls. New technologies – and specifically blockchain solutions such as Corda – open up vast new opportunities in this area.
• Detection optimization – using the power of a consortium to help drive and optimize detection engines within each organization to make sure the right illicit behavior is detected. Here, analytics and AI open up major new potential.
• The utility model – where organizations feed information into a single portal for collective analysis, enabling holistic monitoring and identifying patterns of criminal behavior across the financial network. Detection, alerting and investigation are all carried collectively, with banks sharing all the transactional and KYC information on an anonymized and non-identifiable basis.

Advances in technology have put all of this within reach. Take developments like differential privacy, where data patterns are shared but the specific entity information isn’t. Or zero-knowledge proofs, where organizations can run analytics on fully encrypted data. And finally, there’s blockchain, where data can be decentralized, shared and synchronized across multiple sites or access points. Here R3’s Corda is ideal for providing a safe, secure and shared network with confidentiality and privacy for every participant.

The outcomes and benefits

The consortium approach to AML brings a host of benefits that are now being proven through live trials in regions such as the Nordics. In the future this model promises to transform the financial industry’s collective ability to tackle financial crime, dramatically increasing the current 1 percent detection while also boosting efficiency. A rising tide raises all the ships – and the more financial institutions become part of the consortium, the greater the value will be for the financial system and society as a whole.

To learn more, watch NICE Actimize’s presentation at CordaCon 2020.

NICE Actimize’s Adam McLaughlin and Michael Barret at CordaCon 2020