US Congress flags Banks for AML discrimination

Are Banks stocks rating at risk for missing ESG goals due to Social Discrimination & Bias in legacy AML solutions implemented in banks today?

The new ESG movement is democratizing the business world, no longer pure capitalism rules but what is good for all people, of every background, religion, and social status. Major funds have pledged that they will pull out investment in companies that do not meet ESG goals. Regretfully superficial profiling (commonly used), discriminate and set bias standards for compliance against persons based on whilst being afraid of updating their technology and methods to achieve the pledged ESG goals.

It has been established that ESG in not just another trend, but a means to measure a company’s overall business methods and how it effects society, meaning ESG is democratizing the business world. With over $33 trillion pledged for ESG transformation, and the leading Private Equity firms establishing dedicated ESG funds, no one can state that it is a simple trend. Yet the financial industry and as well as leading Banks are not meeting their ESG requirements, as the idea of “S” is about social inclusion meaning enabling everyone to bank no matter of ethnical or religious affiliation, and currently legacy systems used by banks compliance division are exactly discriminating based on ethnical and/or religious affiliation by superficial profiling. Theses rule-based technology are tuned to be bias to “outsiders” as every person with the name Mohamad is a terrorist or every Vladimir is a Russian Gangster or Carlos is from a drug Cartel criminal. In doing so the banks are not only missing the “S”, but also missing the “G” as over $320 billion AML fines prove that the current legacy systems are not supporting good Governance which is the “G”.

The Discrimination and Bias have become so apparent that in the recent US Budget law passed by Congress August 2021, actual specific language and instruction were given to the Treasury department and FinCen to act to stop this wrong practice. Banks claim that in order to meet AML regulations and compliance they are implementing technologies that might have some level of a negative effect, but in the great scheme it is important as it is stopping money laundering, which fuels illegal drug, human trafficking, illegal arms trading, and criminal activities with terrible social ramifications. The banks are right that money laundering fuel these criminal enterprises, but as the UK FCA and US FinCen regulators both state that today less than 1% of the money laundering is stopped and the money is flowing into the world economy by the banks themselves. Meaning that current compliance technology solutions implemented today are not getting the job done. All the new AML regulations that have been passed into law be it in the EU, UK or USA have expressly state that financial institutions meaning Banks need to seek and implement New Technologies and become updated to meet current demands.

Unknowingly It has become an inherent struggle between ESG and the banking system, whilst banks have been and are the cornerstone of capitalism, it is somehow against the ESG democratization of the businesses market. Yet times are changing as media has become a sword at everyone’s fingertips easily used to call and demand for action, against anyone that does not serve their customers, shareholders, and people in general accordingly. It can be argued that banks actually don’t want to be compliant with ESG and even AML regulations as they make huge profits from this noncompliance, hence the US and EU AML laws have put personal criminal liabilities on the banks managers (which have yet to be imposed) for AML violations. But in time the ESG movement will act when a call for action will appear for De-Investing meaning pension or other large funds will sell the low ESG rated banks stocks. 

In the past well known leading Banks, have well documented AML violations, all using legacy AML name screening technologies and all reluctant to truly update their technologies, and De-Facto all are discriminating and implicitly bias; banks that will not apply updated AML solutions risk a reduction in their ESG rating.

ESG de-investing in banks, will be the least of problems, as noted a Call for Action has been already made and heard, witnessed in the latest US 2021 legislation, demanding that the Treasury Department and FinCen clamp down on banks that are using rule-based AML name screening technologies that as noted De-Facto discriminate and as stated by FinCen “have implicit bias”. For this reason, the banks stocks are at risk, from an equity researcher that will start noting this in the near future, and the loss will be far greater for banks and their management team than ousting legacy technologies and replacing them with new solution for a known problem. There are in fact new technologies using Advance Mathematics Phonetics and Linguistics that resolve the discrimination and bias. Technologies that optimize the AML regime for greater compliance and scrutiny, whilst ensuring proper methods for de-risking financial inclusion and eliminating the above noted banks risk, and thus strongly support achieving the G and the S in ESG! 

Other sources:



Latest Blog Posts
Blog, News
September 27, 2023
The financial world is witnessing an unprecedented collaboration – a partnership that emerges as a potent amalgamation of Finastra’s acclaimed...
Blog, News
September 21, 2023
The finance world converged in Toronto for Sibos 2023, a conference that has been the linchpin for discussions, debates, and...
Blog, News
September 19, 2023
Real-Time Compliance (RTC) meets Real-Time Payments (RTP) In an era where financial transactions move at the speed of light, ensuring...
Blog, News
August 31, 2023
Lessons from OFAC Enforcement Actions of the first half of 2023 The U.S. Department of the Treasury’s Office of Foreign...

Thank you for your interest!
Please leave your details