The financial sector, collectively known as the Banking, Financial Services and Insurance (BFSI) industry, faces the most regulations in terms of compliance with regards to money laundering and fraud. For years the entire sector has been plagued with illicit activities and needs the most robust protection measures from criminals. Due to the same security concerns, banks and financial institutes are sceptical about embracing new technologies. However, anti money laundering or AML compliance is something that the banks cannot – and should not – compromise on. AI is something that has been proliferating every tech form of service available in the market – and compliance measures are not far behind.
Old fashioned compliance methods use only human intelligence and manual methods to verify a client and their financial status. Such methods take time and consequently cost more. The idea of AI is to mimic human cognitive methods and eliminate any negative aspects of it, including time, expansiveness and chance of error. For the BSFI sector, eliminating any one of these limitations – let alone all of them – can help improve their processes immeasurably.
AML Compliance and AI
AML compliance is something that every bank and financial institute needs. With advanced AI it is now becoming possible for banks to adopt innovative solutions to improve their compliance measures. A number of services are available that provide AI technology to implement compliance methods in real time.
One such technology is a transaction monitoring software. The idea behind the software is to monitor a customer’s transactional activity. Doing so can help the AI-based software to determine a pattern of the person’s purchases. Using them as a benchmark, the tech can look for any irregularities – if any at all. Any suspicious activity can then be reported to the management of the bank or financial institute in question. Additionally, the company can also set a number of illicit activities that, should they take place, can also be notified or brought to the attention of the company.
Another simpler service that banks are now making good use of are KYC/AML checks provided by different identity verification service providers. They provide AML and background checks for both existing and new customers and can implement ongoing monitoring as well. They keep a vast databank of watchlists and names of politically exposed personalities (PEPs) – issued by global regulatory authorities. Every time a person who is vulnerable financially or is known for laundering money is flagged by the system and a warning is issued to the bank instantly. The lists are constantly updated to account for any person who enters or leaves the system.
Not long ago, JP Morgan and Chase made an investment in a tech called Contract Intelligence that enables them to analyse and interpret long contracts that took a legal team nearly 360,000 hours to do. The system allows the company to perform customer due diligence and compliance within seconds. As far as AML compliance goes, this is an ingenious way to implement AI in the banking sector. Implementing smart anti money laundering measures can help the BFSI sector to adopt efficient business practices.