HSBC last year started using AI to screen transactions, and the two biggest Nordic banks have said they're replacing compliance staff with algorithms. Lenders would benefit from a common European anti-money-laundering regulator, data sharing among banks, and a more open dialogue with bank supervisors, Citigroup analysts wrote in a note to clients in June. "Ethical concerns associated with AI are rightfully restraining banks' full embrace of machine learning," says Alexon Bell, chief product officer at Quantexa, a London-based data analytics company that counts HSBC among its customers. In December the US Treasury Department's Financial Crimes Enforcement Network, jointly with the Federal Reserve and other US agencies, called on banks to try new approaches to meet anti-money-laundering requirements, including AI, and have offered leniency if the tools uncover deficiencies in existing systems. The wave of scandals -- at Denmark's Danske Bank, Deutsche Bank, and others -- is undermining confidence in the industry well beyond the individual institutions involved.

In the popular Netflix series Ozark, money launderer Marty Byrde expends a lot of time and energy mitigating the risks that relate to his work, including his drug cartel client, a pair of farmers, the local pastor, and his own employee and her relatives--but financial regulators never appear to be a blip on his radar. Would the series turn out differently if Marty's bank had used artificial intelligence to examine his deposits? The feds may be hoping for a plot twist. Recently, several federal agencies jointly encouraged banks to consider developing new technologies, particularly AI technologies, in order to help protect the financial system against money laundering and terrorist financing. Banks are now encouraged to "consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/Anti-Money Laundering compliance obligations" by agencies including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency.