Greetings,

Finance is emerging as the central hub for innovation and AI strategy, with CFOs expected to lead roughly two-thirds of AI operations by 2027, according to a new report from Emburse. One major hurdle to overcome is the pressure to embrace AI and an innovative mindset while also reducing costs and eliminating vendors. Are you feeling these twin mandates? 

Also in this edition:

• Treasury eyeing FinCEN role in AML enforcement 👮
• Fed rate cut highlights internal divisions ✂️➗
• CFOs prioritize cost optimization, forecasting for 2026 🔮
• Labor costs grow slightly less than expected in Q3 💵

An AI spending paradox has emerged as a central challenge for CFOs in 2025, with organizations accelerating AI adoption while enforcing stricter cost controls. Despite mandates to consolidate vendors and demonstrate ROI, AI-related purchases often bypass traditional oversight, with 58% of business leaders stating these tools are the easiest to approve, according to a survey from Emburse. While AI is intended to drive innovation, unchecked enthusiasm can erode efficiency and create new risks, making it critical for finance leaders to shift from chasing AI hype to enforcing evidence-based governance.

The Treasury Department is advancing an overhaul of anti-money-laundering regulations that would shift enforcement power more directly under its control. The proposal, currently in draft form, would allow the Financial Crimes Enforcement Network to veto other regulators' findings on Bank Secrecy Act violations, potentially reducing penalties for banks' technical violations. Such a change could address banks' concerns that current AML rules are expensive and overly focused on technical compliance rather than substantive effectiveness.

The Federal Reserve's quarter-percentage-point interest-rate cut this week faced significant internal resistance, with three dissenting votes and four officials quietly objecting by projecting higher rates for 2025. President Donald Trump criticized the cut as insufficient and expressed a desire for lower rates, posing a challenge for Powell's successor. The Fed's decision reflects a split between officials concerned about a weakening labor market and those wary of cutting rates in an economy they think is stronger than it appears.

The Federal Reserve will begin purchasing $40 billion in Treasury bills monthly, starting Friday, to ease short-term funding costs and rebuild its reserves, in response to rising short-term rates and funding market pressures. This move comes earlier and is larger than expected, with the Fed noting that reserve balances have declined to ample levels. The New York Fed expects elevated reserve management purchases for a few months before reducing the pace.

The Office of the Comptroller of the Currency says the nine biggest national banks curtailed business with controversial industries to protect their reputations. The OCC's review, prompted by President Donald Trump's executive order on alleged "debanking," suggests that banks avoided business with industries such as cryptocurrency and firearms based more on reputational risk than financial risk.

CFOs are balancing short-term cost cuts and long-term growth investments, according to a recent Gartner survey. Cost optimization is a top priority for more than half of CFOs, while 47% view allocating capital to new growth as a top priority. Gartner warns that unsustainable cuts can negatively impact long-term value, noting that successful CFOs foster a transparent and cost-conscious culture and strategically redirect resources toward business differentiation. Separately, only 36% of CFOs feel confident in their ability to drive meaningful enterprise AI impact, despite increased spending on AI.

The employment cost index was up 0.8% in the third quarter, according to the Bureau of Labor Statistics, below the estimate of 0.9% in a Reuters survey of economists. Costs gained 3.5% in the 12 months through September, the report shows.

OpenAI is cautioning that its next-generation AI models may introduce significant cybersecurity risk as their capabilities advance. The AI firm notes that these models might be able to create zero-day remote exploits or support sophisticated enterprise and industrial cyber intrusions, potentially leading to real-world impacts. To mitigate risks, OpenAI is strengthening defensive cybersecurity measures, creating tools for code auditing and vulnerability patching, and establishing the Frontier Risk Council advisory group.

The inaugural Audit Transformation Report, co-authored by CPA.com and the AICPA, offers a detailed snapshot of how audit firms are evolving, based on insights from 54 US firms. The report establishes a baseline for transformation across the profession, identifying five core themes that highlight strategic, methodological and technological shifts underway. It also provides a structured template for firms to organize and document their transformation plans, guiding firm leaders through the journey toward modern audit delivery.

Investment banks are increasingly leveraging AI by compiling extensive datasets from years of deal history, with the goal of gaining a competitive edge. Moelis & Co. and Houlihan Lokey are at the forefront of this trend, with the latter using its vast data to launch a private credit data platform. This shift raises questions about the future need for junior bankers, although Moelis continues to hire large analyst classes. "Productivity is going to go up," says PJT Partners CEO Paul Taubman. "The question then becomes: What do you do with that productivity surplus?"

US Federal Reserve Chair Jerome Powell has expressed concerns that official job statistics may be overstating job creation by as many as 60,000 jobs per month, potentially indicating a net loss of 20,000 jobs per month since April. The US Bureau of Labor Statistics' birth-death model, which estimates jobs from new and closed businesses, has been identified as a significant issue, prompting the BLS to plan model adjustments by February.

It's good to get your teams out of their comfort zone, but the goals you set for them can become toxic if you don't provide the necessary resources, frequently change them or team members feel criticized, no matter how hard they work to achieve them, writes leadership development expert Tim Jackson. Focus instead on fewer, bolder goals and provide team members with the resources and encouragement they need to reach them, Jackson advises.

A security audit conducted in 2018 outlined a scenario in which thieves could access the Galerie d'Apollon using a moving truck with a motorized ladder. The report, which included a detailed drawing, was archived but not shared with the Louvre's current management. French police are now examining the audit as part of their investigation into the $101 million jewel heist that occurred using the same method. Although the audit recommended both reinforcing display cases and improving perimeter security, only the former was implemented.