How AI Impacts AML and KYC Compliance

How AI Impacts AML and KYC Compliance

Anti-money laundering (AML) is one of the toughest issues in the financial industry today. Because the amount of money coming from criminal acts as terrorism and drug trafficking has reached nearly to $2.4 trillion per year. And this money will be laundered somehow by taking advantage of the gaps in banking systems and financial industries.

That’s why financial institutions are under big pressure by governments with strict regulations such as AML and Know Your Customer (KYC) compliances.

At that point, technological innovations such as Artificial Intelligent (AI) seems to be the golden key to unlock the problem. But before diving into the AI issue, let’s first have a look at the nature of money laundering.

The History Of Money Laundering

Actually, the history of the term “money laundering” is rooted in an American gangster Al Capone. He was using laundromats to channel the money he was making through his criminal actions in the early 1900s.

The reason he chose laundromats was that the cash-heavy nature in those enterprises was making it hard to get detected by the laws. Capone was not a famous gangster those days but after him, money laundering has gained increasing momentum.

The rise of the amount is tied to the increase in criminal acts and the range of crimes. Today, the financial crime has a long list of actions from theft, fraud, blackmail, deception, corruption and many more.

How AI Helps Banks To Overcome AML Compliance

In order to overcome the financial crime risks, financial institutions began to hire more investigators and other relevant staff. However, with the rise of digitalisation and the increase in money transfers, this solution also became too costly and risky because of the complexity of manual, repetitive tasks.

On the other hand, scientists were and still are working to create human-like machine intelligence to transform industries by automating processes. Thus, it was inevitable for financial institutions to benefit from AI in crime investigations.

Speaking of AI, it would be beneficial to say that every institution needs its own model. Thus, to build a satisfying AI model and overcome the AML compliance issue, every institution should join powers with an experienced technology provider.

As payment methods, international trade and money laundering processes become varied, the search for ways to prevent these operations was also accelerated. And Artificial Intelligence (AI) technology seems to be creating a new era in the finance industry for the risky, complex, costly and hard to manage structure of the fight against criminal acts.

Below, we have listed some issues AI can help banks to increase the effectiveness and efficiency of financial crime investigations, and the institution’s risk management.

Impacts Of AI On AML Compliance

Enhanced Due Diligence and Client Risk Profiles 

AI turns the client risk profile creation and updates into automated processes. The system automatically classifies the profiles as high-, medium- or low-risk to provide safety throughout the client life cycle. By using AI financial institutions are able to identify high-risk transactions easier and enhance their due diligence processes.

Ease In Screening, Investigation and Alert Processes 

With the help of AI, it is now possible to analyse and derive meaning from large amounts of data like texts to produce risk profiles. This helps financial institutions and especially their compliance teams to screen, investigate and balance the risk with creating accurate conclusions. Combining the alert generation process with AI by linking high-quality data to the alert also helps reduce false positives.

Regulatory Change and Compliance 

As mentioned above, AI has the ability to pursue patterns in texts that give the opportunity to detect and understand the changes in the regulations. Plus, Neuro-linguistic programming (NLP) provides analysations and classifications of the user information documents to update both the institution and its clients according to the changes in regulations.

The Conclusion 

To get the most out of an AI-driven program, institutions should be detecting the most suitable way of implementing it. It is significant to work with an experienced and solution-oriented external provider like Fineksus to perfectly implement the best AI solution.

Fineksus consultants would be pleased to help if you have further questions and a need for financial technologies. Contact Fineksus to learn more about the solutions.

2019-07-16T16:41:48+00:00