Jonathan Bennett
The latest technology to help against money laundering – quantum computing. That’s right, AI has already been replaced as the silver bullet that will help stop global money laundering.
Lloyds Banking Group recently announced that they have begun testing the use of quantum computing to detect money mule activity in an effort to strengthen their financial crime controls and prevent illicit money entering their system.
Conducted in partnership with IBM, Lloyds used the technology to help identify money mules over a nine-month period by identifying complex patterns that current computers just can’t quantify.
Cutting-edge innovation, but not a practical solution yet
While this experiment is very exciting and shows how cutting-edge technologies could one day prevent illicit funds from entering the financial system in the first place, it is far from being operational en masse, and do we really need computers that utilise theoretical physics to prevent a wanted criminal from buying prime London properties?
The answer must certainly be no.
While some money laundering does involve extremely complex schemes, a lot of it is very simple and relies upon your ordinary business not doing the basics well enough, not asking the right questions or not challenging their customers.
Law firms already have the tools they need
While there may be a day where quantum computing becomes the norm, most law firms have access to the tools they need to ensure they are helping to combat financial crime today. From digital identity verification software, open-banking-powered source of funds checks, and dynamic client risk assessment forms. Onboarding a client and assessing the risk profile has arguably gotten easier, as long as you have the right policies, processes and systems in place.
For law firms, the most effective way to prevent money laundering is to focus on consistency and scrutiny during client onboarding. This means going beyond a superficial tick-box approach and ensuring that identity verification, source of funds and source of wealth checks are properly understood and evidenced.
Strong fundamentals remain the most effective defence
Using tools such as digital IDV, open banking data and structured risk assessment frameworks can significantly reduce the burden, but they are only as effective as the people using them. Fee earners need to be confident in identifying red flags, understanding when something doesn’t quite feel right, and feel comfortable escalating concerns with both their customers and colleagues.
Ongoing monitoring is equally important. Risk is not static, and a client who appears low risk at the outset can quickly change depending on the nature of the transaction or new information that comes to light. We don’t need quantum computing to be able to check proactively against the latest sanctions list, that can be fully automated with minimal effort. Law firms should ensure they have processes in place to reassess client risk throughout the lifecycle of a matter, particularly in higher-risk areas such as property transactions. Regular file reviews, clear audit trails, and a culture that supports challenge and accountability will do far more to prevent money laundering than any emerging technology. Ultimately, strong fundamentals, applied consistently, remain the most effective defence.
The more that technology can be used to prevent illicit funds entering the financial system in the first place, the more secure the entire system becomes and draw of criminal activity deteriorates. We can all play our part though by being vigilant and using the tools we have available to us today to the best of our abilities.
For more information on quantum computing in AML and practical compliance solutions, visit Credas