AFC CHALLENGES
Recommendations for managing financial crime in open banking
▪ Regulators play a crucial role in overseeing open banking services , as third-party providers require their approval and supervision to operate legally . To effectively manage financial crime , regulators should update privacy laws to protect consumer privacy while still allowing innovative technologies for regulatory supervision . Information sharing in open banking can create vulnerabilities that criminals may exploit , and addressing this weakness in privacy laws is essential .
▪ Adopting AI and machine learning technologies is also recommended for regulators to handle large volumes of data and fastpaced transactions in open banking . By leveraging these technologies , regulators can improve the quality of financial crime supervision and investigations , minimize errors and enable timely interventions .
▪ In addition , regulators should establish a centralized , secure database for financial intelligence , where reported suspicious activities can be shared among regulatory jurisdictions and FIs . This centralized system would enhance the detection of suspicious activities across different jurisdictions and enable timely interventions .
▪ FIs should invest in privacy enhancement technologies to build consumer trust and ensure the secure management of customer information in open banking . Compliance with regulations is crucial to prevent FIs from being used for money laundering and terrorist financing . Integrating AI and machine learning technologies into transaction monitoring and suspicious activities reporting processes can enhance compliance , accuracy and early detection of suspicious customers , even in high-volume transaction environments .
▪ Collaboration between FIs and their subsidiaries in different jurisdictions will also be key to sharing financial intelligence on reported suspicious transactions . This collaboration would enable the flagging of criminals across multiple jurisdictions and prevent them from utilizing various institutions for their criminal activities .
▪ To address the dynamic risks introduced by open banking , continuous education of forensic accountants is necessary . Educational institutions , professional associations and industry stakeholders should contribute to this education by incorporating open banking courses into the curriculum ; organizing workshops , boot camps and certification programs ; and facilitating the exchange of updated regulatory information . By equipping forensic accountants with knowledge and skills related to open banking , they can effectively contribute to managing financial crime risks in this evolving landscape .
Conclusion
Open banking is an innovative approach to financial mediation with the potential to advance customer engagement to a new era . However , its implementation in Canada requires a multi-tiered approach to managing the financial risks that may arise from it . This includes regulators reviewing privacy laws and providing an expanded definition of reporting institutions for money laundering compliance , customers being educated on the innovation to identify fraud issues and report them , banks making technological advancements to their products and credit administration , and fintech companies regulating their access to vast customer data to contribute to fighting financial crime .
While open banking will have a positive impact on the banking industry , it also presents new risks for financial crime that require a thorough review by forensic accountants and the financial intelligence units of banks .
Joseph Opuni-Mensah , MFAcc , CAMS , FIS , transaction monitoring solutions manager , Canada , opunimensah @ gmail . com
1
Visa Consulting and Analytics , “ The Future of Banking Is Open ,” VISA , 2020 , https :// usa . visa . com / dam / VCOM / global / partner-with-us / documents / visa-open-banking-whitepaper . pdf
2
“ Open Banking around the World ,” TrueLayer , 2022 , https :// truelayer . com / openbanking / open-banking-around-the-world ; “ CMA Corporate Report : Update on Open Banking ,” CMA , November 5 , 2021 , https :// www . gov . uk / government / publications / update-governance-of-open-banking / update-on-open-banking
3
Ibid .
20 acamstoday . org