Regulatory Roundup: May 2024

Welcome to the May 2024 edition of FinScan’s Regulatory Roundup. This month spotlights AML and sanctions updates from the EU, SEC, and DOJ, with emphasis on geopolitical risk and artificial intelligence.

Anti-money laundering

EU adopts new rules to combat money laundering

The European Parliament has adopted a package of laws strengthening the EU’s toolkit to fight money-laundering and terrorist financing.​ The new provisions focus on strengthening and extending due diligence/KYC and suspicious activity reporting requirements, enhancing “vigilance provisions” for high-net-worth individuals, and broadening access to beneficial ownership information.

SEC submits scathing comment on FinCEN’s latest AML/CFT proposal

Comments from the SEC’s commissioner, Hester Peirce, criticize FinCEN’s latest proposal to subject certain investment advisers to a range of anti-money laundering/countering the financing of terrorism (AML/CFT) regulations. She notes that “broker-dealers, mutual funds, futures commission merchants, and banks are all subject to the full panoply of BSA requirements”, making it “hard to conceive of an adviser-related activity that would not fall within the regulatory ambit of some or all of those covered financial institutions.”

Sanctions Guidance

Corporates prioritize geopolitical risk management

Geopolitical turmoil has forced companies to shift away from globalization and focus instead on risk management, experts say.​ Sony board member and Rorschach Advisory chief executive Joseph Kraft said companies are moving away from a globalized model in which they tried to keep manufacturing and export costs low, and where cost management was their key concern.​

Former North Korean official indicated on sanctions evasion and other charges

An indictment was unsealed last month charging a former North Korean official serving in Thailand with conspiracy to violate U.S. economic sanctions bank fraud, and international money laundering. U.S. financial institutions unknowingly processed multiple U.S. dollar transactions for the benefit of North Korea.

Artificial Intelligence

U.S. Department of Commerce moves forward on Biden’s executive order on AI

Marking 180 days since President Biden’s executive order on the Safe, Secure and Trustworthy Development of AI, the Department of Commerce’s National Institute of Standards and Technology (NIST) has released four draft publications intended to help improve the safety, security and trustworthiness of artificial intelligence​.

Multiple U.S. state insurance commissioners speak out on the impact of AI

Washington state issued a technical assistance advisory reminding insurers that decisions or actions impacting consumers made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations. Maryland provides regulatory direction to insurance companies regarding their use of AI, reminding carriers that when they use advanced analytical and computational technologies like AI to make decisions that impact consumers, they must comply with all applicable insurance laws and regulations, including Maryland’s unfair trade practice and anti-discrimination laws.​

UK’s ICO issues generative AI third call for evidence focused on data and output accuracy

The UK’s Information Commissioner’s Office (ICO) issued a generative AI third call for evidence focused on the accuracy of training data and model outputs. The question is, should the outputs of generative AI models be accurate? ​One must first consider what a specific application based on a generative AI model is used for. Once the organization deploying the model has established the purpose for it, and ensured with the developer that the model is appropriate for that purpose, it can then decide whether the purpose requires accurate outputs.

Need some help?

We’ll continue to monitor regulatory developments and provide updates in future editions of Regulatory Roundup. In the meantime, reach out to us if you need help navigating the evolving landscape of regulations and enforcement actions.

FinScan offers Advisory Services to assist with model risk management, data governance, policies and procedures, and assessing your organization’s data quality, sanctions compliance program, customer and compliance risk, and AI framework, to name a few. Contact us to learn more.