The Role of Technology in Modern AML/CFT Supervision
The European Banking Authority (EBA) has released a comprehensive report highlighting the growing importance of technology tools in anti-money laundering and countering the financing of terrorism (AML/CFT) supervision, also known as supervisory technology or SupTech. This initiative represents a significant shift in how financial regulators monitor and manage risks within the banking sector.
SupTech involves the use of advanced technological solutions by regulatory bodies to enhance their capacity to oversee financial institutions. These tools are designed to improve the monitoring, analysis, and supervision of financial activities, making it easier to detect suspicious transactions and ensure compliance with AML/CFT regulations.
In the context of AML/CFT, SupTech can include a variety of applications such as data analytics platforms, artificial intelligence systems, and blockchain-based tracking mechanisms. These technologies help in identifying irregularities in financial flows, improving the accuracy of data reporting, and enabling more effective risk-based supervision.
The report outlines the current state of innovation across the European Union and explores how these developments can support the implementation of the new EU AML/CFT framework. Central to this framework is the establishment of the Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA), which will be responsible for overseeing and coordinating AML/CFT supervision at the European level.
According to the EBA, the creation of AMLA presents a unique opportunity to reevaluate supervisory approaches and leverage technology to enhance oversight. To gather insights for the report, the EBA conducted surveys with national competent authorities (NCAs) and organized a dedicated workshop with the European Commission’s AMLA Task Force. This collaboration aimed to identify trends, challenges, and best practices in the application of SupTech for AML/CFT supervision.
The report provides an in-depth look at how SupTech is being implemented across the EU. It highlights effective practices in areas such as change management, data and technology infrastructure, and supervisory strategies. These practices are essential for developing a more risk-based, data-driven, and scalable supervisory model under the new AML/CFT framework.
Although SupTech applications in AML/CFT are still in the early stages of development, the report notes that nearly half of the identified tools or projects—47%—are already in production. Another 38% are in the development phase, while 15% are still in the exploratory stage.
The EBA has observed tangible benefits from the deployment of SupTech by NCAs. These include improved data quality, enhanced collaboration among supervisory bodies, and more efficient identification of risks within financial systems. However, several challenges persist. Authorities face constraints related to limited resources, legal uncertainty, and data governance issues, which continue to hinder the broader adoption of technology in supervision.
The EBA has committed to supporting both NCAs and AMLA in strengthening their use of technology and fostering innovation in AML/CFT supervision across the EU. The report also reflects the EBA’s legal responsibilities under its Founding Regulation.
Article 29 mandates the EBA to actively contribute to building a common Union supervisory culture and ensuring consistent supervisory practices. Article 31 requires the EBA to promote supervisory convergence and facilitate the entry of innovative actors or products into the market, particularly through the exchange of information and best practices.
Ultimately, the EBA emphasizes that its mandate aims to support the establishment of a unified European approach to technological innovation in financial supervision. This effort is crucial for enhancing the resilience and effectiveness of the financial system against illicit activities.
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