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INSIGHT: AI is not coming for AML jobs, say bank fincrime staff; perennial staff shortage problems also highlighted

FINCRIME: Today's report shows AI is becoming essential for Financial Crime compliance with 86% of organizations stating they will increase their spending on AI and machine learning over the next two years. Our file photo shows people visit the 2023 World Artificial Intelligence Conference in Shanghai, China earlier this year.

ARTIFICIAL INTELLIGENCE (AI) isn’t coming for the jobs of AML professionals at banks, according to a survey released this week.

The majority (93%) of respondents said they would use automation to support risk and the business rather than to eliminate people.

The report from WorkFusion and Celent shows that staffing issues continue to plague the industry -with 74% unhappy with their current staffing levels. And when push comes to shove, senior personnel are filling the gaps of the understaffing.

The survey shows:

• Rather than AI taking jobs from AML professionals, organizations are using automation to increase efficiency and productivity, freeing up capacity to support risk and the business.
• AI is becoming essential for Financial Crime compliance with 86% of organizations stating they will increase their spending on AI and machine learning over the next two years.
• Staff shortages and employee retention are perennial issues that create an unvirtuous cycle, leading to delays in compliance processes and limiting the ability of compliance departments to support the business with 74% unhappy with their current staffing level and 22% understaffed.

WorkFusion, a provider of AI digital solutions in for financial services today announced findings the research entitled “Technology Transformation in Financial Crime Compliance.”

The report, developed and fielded in conjunction with Celent, the research and advisory firm focused on technology for financial institutions globally, found that while 86% of compliance, operations, risk and IT professionals at banks and non-banking financial institutions (NBFIs) surveyed said they would increase spending on AI and machine learning over the next two years.

The vast majority (93%) of respondents said that instead of using automation to reduce staff, they would focus that extra capacity on strategies to manage risk and grow the business.

“Leveraging AI-enabled automation technology to enhance efficiency and productivity can help alleviate capacity shortfalls in financial crime operations,” said Neil Katkov, PhD, Director – Risk at Celent.

“And as technology drives improvements in productivity, compliance departments can better support strategies to manage risk and add value,” he said.

It also shows organizations are struggling with staffing and capacity issues.
Employee shortages have become business as usual in financial crime compliance. Especially for level one teams, heavy workloads and repetitive and routine processes can lead to employee burnout:

· 70% of banks and NBFIs face capacity challenges in their compliance operations—meaning that many departments that are “staffed adequately” face at least occasional capacity shortfalls.
· 38% of firms fill capacity gaps by calling on more senior personnel to pitch in. Smaller organizations are more likely to call on their compliance officers to help—44% of organizations with assets under US $50 billion rely on senior personnel to close gaps.
· Nearly two-thirds (63%) of firms report that it takes four months or longer to fill experienced compliance analyst roles. Only 10% of firms can find experienced analysts in less than one month. Once hired, onboarding and training extends the time for fully replacing lost staff. Half of firms say it takes over four months to ramp-up new hires, with only 17% able to do so in a month.
· 53% say that employee retention issues put increased workloads on the remaining staff. About the same proportion of firms said that these staffing challenges led to longer cycle times for alert investigation, directly impacting compliance operations.

Organizations try a variety of approaches to increase screening efficiency.
Efforts by compliance departments to reduce analyst workloads include screening analytics, staff augmentation, specialized consultants, and technology levers:

· If organizations had more capacity, 35% of respondents said they would improve risk monitoring by increasing the frequency of KYC reviews, 57% would use the additional capacity to pursue more revenue: 31% would work to shorten cycle times for account opening, and 26% would work to increase the firm’s risk appetite to take on new customers. Only 7% would look to layoff staff.
· List management techniques—which include de-duplication, entity consolidation, and targeted application of lists to specific transaction flows or customer segments—have been used by 75% of firms and represent the top approach for banks, savings/credit unions, and fintechs alike. Good person/bad person rules were the second most common approach taken by banks (48%); staff augmentation was second for savings/credit unions; and consultants were second for fintechs.
· Throwing bodies at the problem is the least effective approach, with 75% of organizations getting 25% or lower uplift.

The use of automation technologies for compliance processes is becoming standard. AI is becoming essential for Financial Crime compliance.
· 86% of organizations responded that they will increase their spending on AI and machine learning over the next two years, 45% of those said they will increase AI spending significantly.
· Regulatory action would motivate 75% of organizations to adopt digital workers or similar advanced technology to improve compliance operations. Following regulation, staffing challenges were cited by 65% of respondents as a compelling reason for automation technology.

This survey on staffing issues and technology trends in financial crime compliance was designed by Celent and WorkFusion. The survey was fielded in July 2023. A total of 110 North American compliance, operations, risk, and IT professionals completed the survey.

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