USING TECHNOLOGICAL INNOVATION TO COMBAT FINANCIAL CRIMES
KALI AND THE CENTRAL BANK GOVERNOR
Kali, a senior compliance officer in the Central Bank of EAC (an African country with a solid banking industry and thriving technology sector) notices that a set of commercial bank accounts he monitors are demonstrating highly unusual activity. In his role at the Central Bank, Kali routinely has access to all aggregate banking data across the sector. In his late 20s, Kali is tech savvy and a strong proponent for the application of Artificial Intelligence (AI) in government – an issue where policy significantly lags innovation in EAC. Prior to the Central Bank, Kali spent half of his career in the technology department of Tier 1 bank working with AI. He rose rapidly eventually reporting to the CEO at the bank.
A significant number of the transactions associated with the unusual activity appear to be linked to mobile money accounts of the largest Mobile Money company in EAC. The potential infractions all seem to be affiliated with Tier 1 banks that handle major government contracts in EAC. All the Tier 1 banks in EAC have an exceptional track record of fighting financial crime based on the existing legal framework.
Compliance with the law requires Kali to follow a strict chain of command in reporting incidences that warrant further investigation by the Central Bank. Kali’s next departmental check-in with the Governor is two weeks away – the earliest opportunity he has to report his observations to her. During statutory meetings, only the Governor of the Central Bank can engage specific stakeholders of the Central Bank, including CEOs of Banks, Permanent Secretaries (PS), Ministers and Legislators on matters of compliance. She is a stickler for law. The Governor is a seasoned academic who understands the sector well. She is due for a term renewal by the President of EAC and she is therefore particularly meticulous in her current stakeholder engagements.
CEOs of all the commercial banks in EAC are slated for a closed-door statutory meeting with the Governor to discuss the banking sector relative to the state of the economy and regulatory compliance.
The Minister of Finance and her Permanent Secretary are slated to join the meeting. The Ministry of Finance sits on the Boards of several Tier One banks and on the Board of EAC’s largest Mobile Money company. The Ministry of Finance also sits in an inter-agency investigative committee that EAC has established to fight financial crime.
Chairs (or their designee) of the EAC’s respective legislative committees involved in finance will be in attendance at the statutory meeting. One of the Committee Chairs is a former Board Member and current shareholder of a Tier 1 bank that handles major government contracts.
There is an ongoing tension between banks CEOs, the Legislature, the Executive and the Central Bank on who should provide oversight for EAC’s financial system. This tension strongly informs all the Governor’s stakeholder engagements.
THE STATUTORY MEETING
Kali has been designated by the Governor to answer any questions and offer comments at the statutory meeting on matters of compliance and technology. Kali can only comment on issues previously discussed with the Governor at their last departmental check-in. The Governor is therefore unaware of Kali’s significant insights from the previous night.
At the statutory meeting, the CEO of one of the Tier 1 banks speaks in glowing terms of their compliance track record and their strong partnership with the Mobile Money company. He highlights a major government project as an illustration of this unique partnership. He also thanks the Central Bank and the Ministry of Finance and for being strong partners in fighting financial crimes in EAC.
From the CEO’s remarks, Kali immediately recognizes the Tier 1 bank as one of the key institutions impacted by the unusual activity he identified the previous night. Based on the emerging patterns informed by his earlier AI analysis, his strong fears of potential infractions by the Tier 1 bank are confirmed. Kali notices that one of the legislators present at the meeting is there on behalf of the finance committee whose Chair is a shareholder of the impacted Tier 1 bank.
Immediately after the statutory meeting, all the attendees will hold a global press briefing to tout EAC’s strong economy. They will attribute it to a sound financial system overseen by strong partnership among the key stakeholders present. Kali’s findings have the potential of invalidating the entire narrative.
Legally, banks are prohibited from divulging client information whenever due process is not followed. However, through AI aggregate client information from the banks and mobile money companies allows Kali to provide insights that can ensure the public good is maximized. However, the legal framework in EAC does not support the use of AI in the way Kali desires.
If Kali comments during the statutory meeting on his findings from the previous night, he risks an immediate reprimand from the Governor for breaking the chain of command. He also risks jeopardizing the Governor’s reappointment to a second term if any claims eventually turn out to be unsubstantiated.
If Kali remains quiet, he risks breaking the law for not reporting a significant compliance infraction if the claims are eventually substantiated. He also risks jeopardizing future investigations of the potential crime given the strict statutory requirements for report compliance issues through periodic meetings.
What should Kali do?