Over the past decade, financial and regulatory technology has grown exponentially, with new technologies promising to make compliance with anti-money laundering and counter-terrorism financing (AML/CFT) measures faster, cheaper, and more effective. New technologies are expected to increase efficiency in tackling financial crime far beyond human compliance checks. However, under the current international AML/CFT regulatory framework, nonprofits - and humanitarian relief organisations in particular - have fallen victim to the financial industry’s tendency to de-risk in order to avoid financial penalties arising from regulatory noncompliance.
This report, prepared by ECNL, Rita R. Soares, LL.M., Dr. Tasniem Anwar and Dr. Mara Wesseling, aims to fill the knowledge gap regarding the real-world impact of these emerging technologies on the nonprofit sector’s access to financial services in an effort to determine what impact these tech solutions are having on civic space. Through interviews with financial institutions, FinTech companies, supervisors, and other experts, ECNL explored how responsibly these technologies are deployed in the financial sector from the perspective of nonprofit clients, who are often an afterthought for financial institutions.
In the report we first outline the kinds of emerging technologies used for compliance purposes. Then, we focus on the de-facto conditions of design, development, deployment and operation of these compliance solutions, grouping the main findings under six key themes:
- Effectiveness & Reliability.
- Fairness & Discrimination.
- Security & Data Privacy.
- Transparency & Explainability.
- Human Oversight & Technical Competence.
- Accountability & Contestability.
We also explore what our findings mean for the nonprofit sector, particularly concerning de-risking and financial inclusion. Finally, we reflect on the main challenges and opportunities for improvement, with a number of recommendations proposed.