This summer, the Financial Action Task Force (FATF) cited geolocation in two key guidance documents: “Guidance on Proliferation Financing Risk Assessment and Mitigation” and “Opportunities and Challenges of New Technologies for AML/CFT.” Geolocation was indicated as a critical data point for financial institutions to leverage against their financial-crime risks.
The FATF recommendations come at a critical time for financial institutions facing increased scrutiny from regulators. In the coming months, FinCEN will be issuing regulations according to newly established AML/CFT priorities, which include international/domestic terrorist financing and proliferation financing.
GeoComply has long advocated the use of additional cyber indicators – beyond easily spoofed IP addresses – including device-based geolocation data points such as GPS, GSM and WiFi. By enabling earlier detection of illicit activities, this valuable data helps create far more robust, efficient and effective risk management processes for the regulated financial sector.
According to FATF, geolocation helps financial institutions fight money laundering, terrorist financing and other financial crimes in three critical ways:
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1. Identify Patterns of Suspicious Activity
Advanced geolocation solutions offer location behavior analysis, both historical and real-time, to help detect patterns of suspicious or fraudulent activity.
To stop proliferation financing, FATF recommends investing in technology and advanced software with machine learning and artificial intelligence capabilities. Such solutions can provide analysis that strengthens the compliance practices of large, complex financial organizations that are more vulnerable to proliferation financing risks.
The guidance on proliferation financing notes: “This would enable them to identify linkages and relationships, and build proliferation financing scenarios and recognise patterns (e.g. transaction times, value, purpose, counterparties, geolocation), which would be difficult to establish otherwise.”
2. Strengthen KYC and Customer Due Diligence (CDD)
Location is an important component of knowing your customer. “Spoof-proof” and accurate geolocation data beyond simple IP addresses ensure that KYC and CDD are robust and protected from exploitation.
With regards to CFT/AML, FATF states that “onboarding tools that allow for quick CDD and client traits analysis (such as geolocation, credit checks, anti-fraud software and others) would also enrich the CDD and monitoring process and lead to a more accurate understanding of the nature of the business relationship, as well as its impact to the institutions.”
3.Create a More Robust Digital Identity
In its 2020 “Guidance on Digital Identity,” FATF recognized the role of geolocation data in strengthening digital identity. It specifically highlighted geolocation as an example of a dynamic, digital customer data source that enables regulated entities to capture essential authentication information.
As of March of this year, the Mexican government began to require its banks to collect and maintain the real-time geolocation of customers accessing digital services. According to the National Banking and Securities Commission, this mandate “is derived from the international commitments adopted by Mexico as a member of the Financial Action Task Force (FATF)” and that it “is in line with the Guide on Digital Identity released by the FATF in March 2020.”
We applaud FATF for its leadership in encouraging the use of advanced technology and data such as geolocation to fight the ever-evolving, fast-growing scourge of financial crime.