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The Morning Risk Report: Banks Take Hint From Regulators and Test AI to Spot Criminals |
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U.S. Bancorp began using AI in its anti-money-laundering compliance division two years ago. PHOTO: MICHAEL NAGLE/BLOOMBERG NEWS
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Good day. Artificial intelligence has transformed some parts the banking industry, but one critical area—watching out for financial crimes such as money laundering—has been late to the party, Risk & Compliance Journal’s Kristin Broughton and Samuel Rubenfeld report.
The hold up? Lenders fear AI might be too good. Some worry the technology will reveal suspicious accounts that slipped through legacy systems, unearthing weaknesses in monitoring and exposing them to regulatory scrutiny.
[Continued Below…]
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“The banks were saying that ‘I need a signal—I need a sign from regulators that I’m not going to get dinged,’ ” said Gary Shiffman, chief executive of compliance technology company Giant Oak and an adjunct professor at Georgetown University’s Center for Security Studies.
That signal came last month, when financial regulators said banks wouldn’t necessarily be punished for previously undetected red flags they discover while tinkering with anti-money-laundering compliance technology such as AI. As a result of the statement, more financial services companies are seeking AI guidance from agencies such as the U.S. Treasury Department’s anti-money-laundering division.
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The scenario PG&E Corp. finds itself in—facing more than $30 billion in potential liability costs related to its role in deadly California wildfires—amplifies the need for companies to spend more time devising plans to manage low-probability risks with potentially catastrophic consequences, risk management experts say.
The decade’s drought in California was unprecedented, bringing fire risks few had experienced. As conditions became more conducive to massive fires, the utility’s power lines kept providing sparks. PG&E spent heavily to make its system safer but couldn’t prevent an increase in fires. The company said Monday that it plans to file for bankruptcy protection by the end of the month.
“Black swan” events, anything from natural disasters to technological glitches that could affect a company’s digital infrastructure, require the same attention and planning as other more probable events, said Mark Beasley, a professor of enterprise risk management at N.C. State University.
“A lot of the times entities would think about the probabilities of that happening,” he said. “When that’s very low, they just move on to the other issues with higher probabilities. What they skipped over could have cataphoric impact to them when there is no game plan.”
— Mengqi Sun
More on PG&E:
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| From Risk & Compliance Journal |
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U.K. Home Secretary Sajid Javid will be a joint chairman of a new task force set up to fight economic crime in the nation. PHOTO: CHRIS J. RATCLIFFE/BLOOMBERG NEWS
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The U.K. home secretary and chancellor will chair jointly a new task force that will work with the financial sector to fight economic crime, the government said Monday. The task force will include the chief executives of Barclays PLC, Lloyds Bank PLC and Banco Santander SA, as well as trade group leaders and senior regulatory and law-enforcement officials, the government said.
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Nicolás Maduro, Venezuela's president, spoke during a state of the union address in Caracas on Monday. PHOTO: CARLOS BECERRA/BLOOMBERG NEWS
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The U.S. is evaluating whether to impose tougher sanctions against Venezuela’s military and vital oil industry, a senior White House official said Monday, as it seeks to ratchet up pressure on authoritarian leader Nicolás Maduro to hold free and fair elections.
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FedEx Corp.’s ground-delivery unit agreed to pay New York City and state $35 million to settle three lawsuits that alleged the company knowingly shipped hundreds of thousands of untaxed cigarettes.
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Glencore PLC, Swiss mining giant, provided nearly $1 billion in loans and advances to companies associated with an Israeli businessman accused of having corrupt ties to government officials in the Democratic Republic of Congo, according to documents reviewed by The Wall Street Journal. The amount of the loans—more than previously reported—highlights the financial ties between Glencore and Mr. Gertler during their decadelong partnership in Congo.
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Federal air-safety regulators for the first time proposed allowing small drones to routinely fly over crowds of people and at night, long-awaited steps toward opening up more airspace and commercial opportunities for unmanned aircraft.
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A federal judge temporarily blocked a revised set of Trump administration rules allowing employers with religious or moral objections to opt out of providing their workers with health insurance that covers birth control.
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The founder and CEO of Huawei Technologies Co. said his company has never spied for the Chinese government—and never would—as he made a rare public appearance following the arrest of his daughter in Canada. Separately, Huawei, which has established itself as a pillar of Poland’s telecommunications network, lost some of that country's trust. In recent months, Polish authorities had quietly grown concerned that the nation’s deep reliance on Huawei has exposed it to espionage threats from Beijing. Those worries burst into the open Friday with the arrest of a Huawei employee in Poland.
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BMW cars lined up at the company’s factory in the northeastern Chinese city of Shenyang. PHOTO: STR/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Chinese passenger-vehicle sales fell last year for the first time since 1990 as economic uncertainty weighed on consumers, producing a wreck for Ford Motor Co., General Motors Co. and other manufacturers.
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Meanwhile, the Trump administration’s trade tactics dent another growth driver, as Chinese exports unexpectedly decline 4.4% from a year ago, according to data from China’s customs administration released Monday.
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The president of Chinese e-commerce giant Alibaba Group Holding Ltd. expressed confidence in the country’s consumer market despite recent data showing a deepening economic slowdown.
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The U.S. and many other large economies are set for a further slowdown this year, although there are signs of stabilization in China, according to leading indicators released Monday by the Organization for Economic Cooperation and Development.
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Gillette's new ad puts a new spin on the brand’s 30-year tagline—‘The Best a Man Can Get.’ PHOTO: PROCTER & GAMBLE CO.
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Procter & Gamble Co.’s Gillette is embracing the #MeToo movement in a new digital ad campaign aimed at men, the latest message from an advertiser attempting to change societal norms.The ad puts a new spin on the brand’s 30-year tagline, “The Best A Man Can Get,” challenging men to take positive actions, such as stopping other men, and the next generation, from harassing women.
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In addition to publishing USA Today, one of the top-selling papers in the country, Gannett owns and operates dozens of other publications. PHOTO: LARRY DOWNING/REUTERS
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MNG Enterprises Inc., a hedge-fund-backed media group known for buying up struggling local papers and cutting costs, has made an offer for USA Today publisher Gannett Co. It is urging the McLean, Va., publisher to review its strategic alternatives, including a potential sale. It also is calling on Gannett to commit to a moratorium on digital investments.
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Newmont Mining Corp. agreed to buy rival Canadian gold producer Goldcorp Inc. in a $10 billion, all-stock deal, creating the world’s largest gold miner. The deal intensifies a consolidation wave triggered in part by languishing prices and dwindling supplies of easy-to-find gold.
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Blackstone Group LP hired away a General Atlantic executive to launch a business that will invest in fast-growing companies.
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Comcast Corp.’s NBCUniversal said it plans to launch an ad-supported streaming video service that will be free for pay-TV subscribers, adding to a plethora of coming options for consumers from big media companies.
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Signage is displayed outside a Krispy Kreme Doughnuts store in Louisville, Ky. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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JAB Ltd., the consumer-goods powerhouse that owns Krispy Kreme, Dr Pepper, Peet’s Coffee, Panera Bread and Stumptown, said its chairman, Bart Becht, is retiring and would leave the company immediately. It didn’t name a new chairman.
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The wife of ousted Nissan Motor Co. executive Carlos Ghosn urged an international human-rights watchdog to raise awareness of her husband’s treatment at the hands of the Japanese criminal justice system, ahead of a court hearing on whether to grant Mr. Ghosn bail after more than 50 days in jail.
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Autonomous vehicle startup Zoox Inc. has named veteran Intel Corp. executive Aicha Evans its new CEO, recruiting a seasoned manager to replace its ousted founder as the company attempts to reinvent the car.
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