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The U.S. Financial Crimes Enforcement Network (FinCEN) recently issued a bulletin urging financial firms to be vigilant in identifying deepfakes that fraudsters may use to evade customer due diligence programs. The bulletin highlights the evolving nature of compliance risks, which are now intertwined with operational risks. Ignoring these threats could lead to severe consequences, beyond regulatory enforcement actions.
The use of generative AI tools by fraudsters to falsify identification documents poses a significant challenge for financial firms. FinCEN recommends measures such as conducting reverse image searches and using software to detect deepfakes. The need for strong customer due diligence programs is not only a legal requirement but also a crucial risk management strategy to prevent fraud and protect customers.
Compliance officers must broaden their focus beyond regulatory compliance and emphasize the importance of strong compliance programs for effective risk management. Building capabilities such as mapping compliance and operational risks, maintaining strong due diligence practices, fostering a culture of internal reporting, and collaborating closely with other business functions are essential in mitigating risks.
In a landscape where compliance risks have transformed into operational risks, compliance officers must position themselves as valuable assets in managing risks and navigating regulatory uncertainty. By reframing their arguments in the context of enterprise risks, compliance officers can demonstrate the strategic importance of robust compliance functions in today’s business environment.
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