Digital transformation is compelling companies to integrate KYC and AML solutions to minimize risks and provide seamless customer onboarding. Frictionless remote onboarding and AML/KYC solutions are not just mere options, but a necessity. AI-integrated identity verification solutions have made it possible for companies to establish a balance between secured compliance and convenient onboarding.
Decades before the birth of artificial intelligence (AI), there was always the question of whether computers would surpass humans in thinking or intelligence. At the end of World War II, for Alan Turing and other independent scientists it was no longer a murky question, but a workable theory. Less than two decades later, AI became a working reality as it was implemented into the gameplay and simple computer programs.
The need for faster identity verification and global AML solutions introduced the need for automated identity verification solutions. Thus AI became a part of customer due diligence, everyday business processes, and automated workflows. With more data being generated, more complex technologies were used to analyze large volumes of data and identify system errors or human alterations. Therefore, even more, innovative technology and fraud and compliance solutions were needed to manage, protect and drive those applications. Even though AI is not at its peak, the clear global impact it has already made is enough to validate the power of artificial intelligence.
What is Artificial Intelligence?
As much as AI is a buzzword on the internet, not many have a clear definition of what artificial intelligence is. One very technical definition of artificial intelligence from John McCarthy’s 2004 paper states; It is the science and engineering of making intelligent machines, especially intelligent computer programs. It is related to the similar task of using computers to understand human intelligence, but AI does not have to confine itself to methods that are biologically observable.”
In layman’s terms, it means computer programs that are ideally created to mimic or perform rational human behavior and thought but the definition of AI can be transient. Meaning, it’s tech and science, so things change.
Types of Artificial Intelligence
Not many outside the science and technology field know this but, yes there are different types of AI. Don’t worry, it’s not going to turn into a science class, there are only two.
Weak AI, also called Narrow AI or Artificial Narrow Intelligence (ANI) controls most of the AI tech that we work with today. Since this list includes robust applications like Amazon’s Alexa, Apple’s Siri and autonomous vehicles, weak seems almost like a misnomer.
Strong AI is still in its theoretical and development stage. In theory, Artificial General Intelligence (AGI) and Artificial Super Intelligence (ASI) would have intelligence equal to humans. It would be self-aware and have problem-solving, planning, learning abilities and possibly surpass the human brain.
So where do machine learning and deep learning fit in with artificial intelligence?
Again, if you are not in the science and technology field, most people tend to use the terms machine learning and deep learning interchangeably. In reality, deep learning is a subfield of machine learning which is a subfield of AI.
To simplify things, you can think of machine learning as the human-controlled algorithm and deep learning as the machine automated algorithm. Both perform the same basic tasks, but in deep learning, data is processed without human intervention.
What does any of this have to do with Anti-Money Laundering (AML) and Know Your Customer (KYC)? Well, AI technology in the form of machine learning through APIs (Application Programming Interface) has many real-world applications where AML and KYC can benefit.
How does AI Affect Automated KYC and AML Compliance?
The modernization of anti-money laundering policies and the implementation of Know Your Customer as part of customer onboarding solutions meant identity verification needed to be automated to meet customers’ and institutions’ expectations. Global anti-money laundering solutions needed to be able to perform ID card verification on any device from across the globe. Online ID verification solutions needed to include more than simply ID validation. And transaction monitoring needed to be able to weed out bad actors and suspicious activity before any malicious activity took place.
Through more manageable APIs, artificial intelligence is able to improve communications, security, growth, and even monetization of your systems. API’s can be applied to logins, bookings, third-party payment processors and work in larger platforms like Twitter and Google Maps. As a result of the various API protocols, AI can have almost limitless creative capabilities and implementations which allows institutions and citizens greater online protection and freedom.
Biometric Identity Verification of UBO’s
Document verification is the basic requirement of standard customer due diligence and identity verification solutions. For business entities, like large corporations, ID card verification of the owner alone cannot suffice. Especially, when ownership isn’t as clearly defined as with solo entrepreneurs. Seeking out the Ultimate Beneficial Ownership (UBO) can be complicated by proxy sold shares and unknown beneficiaries.
The Ultimate Beneficial Owner (UBO) is the individual who ultimately owns, controls, or benefits from a transaction being conducted by a representative of the institution. According to the European Union’s AMLD4 (Fourth Anti-Money Laundering Directive), UBO’s can be classified as: –
- Anyone with at least a 25% stake in the capital of the legal entity
- Anyone with at least a 25% voting right in the general assembly
- Beneficiaries of at least 25% of the capital of the legal entity
Ownership information must be updated periodically and disclosed to the necessary bodies. Without complete identity verification of UBO’s, companies, banks and individuals could face fines for AML compliance breaches or facilitate terrorism financing.
It is very important to have ID verification solutions and AML/KYC verification processes in place which force the account holder to declare the UBO. However, UBO verification can be tricky to enact within a standard customer onboarding process. Enhanced due diligence (EDD) powered by biometric technology can assist in real-time digital identity verification in minutes.
To perform UBO verification, you must first go beyond customer due diligence. After company document verification, legal ownership validation can be done using share percentage to determine direct or indirect ownership claims. Once completed, identity verification can be done on each individual.
Using our identity verification API in IDMscan, UBO verification can be done via mobile ID verification as part of your global AML solutions. Automated KYC solutions help with frictionless onboarding to your corporate clients for easier online KYC verification.
Enhanced Due Diligence for AML Compliance
Once your UBO’s are identified, a robust check of all key decision-makers using enhanced due diligence as part of your AML solution should be performed to assess risk. Enhanced due diligence assists with configurable risk scoring for AML compliance to identify high or low-risk customers and their threat capabilities.
Aside from basic KYC verification, AI-supported EDD checks clients’ system vulnerability, assets, and protection capabilities. Evaluation of customers’ risk category is performed using the following procedures: –
- Risk Scoring – using high-quality behavioral and demographic data and predictive analytics to create a realistic and effective risk scoring model.
- Ongoing Transaction Monitoring – to identify red flags in processes, user behavior, and system functionality.
- Adverse Media Watchlist – An API can be set to identify negative media reports and flag persons of interest involved.
- Ongoing user behavior monitoring – using behavioral biometrics as part of customer screening and ongoing user behavior monitoring.
- Digital Identity Management – to help with record-keeping and risk strategy development. It also helps with keeping regulators up-to-date and reduces the risk of non-disclosure fines.
- Adaptable Risk-Based Monitoring Strategy – develop an ongoing risk-based monitoring strategy that changes as the subject’s behavior changes.
AI-enhanced EDD provides a much more comprehensive and holistic view of a new customer’s business relationships and financial activities. As part of AML/KYC solutions, AI-supported EDD allows organizations to make more informed choices about who they prefer to do business with.
Factoring in the AML compliance regulations enhanced due diligence should not be an option whether you are onboarding a high or low-risk client. Occasionally, there may be ‘good’ actors who can synthesize an identity well enough to get past at least one stage of the onboarding process. That is why using more than one AI-enhanced tool in your AML solution is the best way to strengthen your ID validation systems.
AI in Transaction and Behaviour Monitoring System
Financial institutions can control billions of transactions by automating the transaction monitoring process. Transaction monitoring is a requirement for businesses under AML compliance obligations. However, productive transaction monitoring should yield positive results and be relatively cost-effective to operate.
AML transaction monitoring controls typically generate high levels of false-positive alerts and critical operational workloads. The cost issue is further amplified by inefficiencies in the investigation process, creating a substantial divide among the efforts employed versus the impact of transaction monitoring controls. AI gives meaningful opportunities to significantly reduce operational costs with no detriment to effectiveness by introducing machine learning techniques at different stages of the transaction monitoring process.
These AI-supported KYC verification software and AML compliance solutions can include a user behavior monitoring system as an API in the clients’ device. This helps with digital identity verification, risk monitoring, online KYC verification, and ongoing sanction screening.
Don’t forget watchlist and sanction screening reports are a part of regulatory reporting and companies that ignore or do not perform adequate watchlist screening risk closure and fines. An automated identity validation service that allows for mobile ID verification while mitigating unwanted behaviors helps financial institutions protect the assets of their valued customers and monitor user behavior.
Automated KYC For A Smoother Customer Onboarding Journey
ID validation has been a part of customer onboarding solutions even before KYC and the internet existed. The concept of ease of doing business meant fewer bells and whistles for customers. But with the introduction of risk compliance services, KYC, and global AML solutions, the customer onboarding journey got somewhat complicated. Technology made things easier through automation but without the correct human direction, AI can do so much.
UBO verification is a top priority in corporate KYC and considering the requirements for identity verification services and AML compliance to avoid risk, the customer journey seemed doomed to be a long tedious process. A solid and seamless customer onboarding journey map still needed to be designed before the introduction of automation. For companies without a strong marketing team, a reputable ID verification service can assist in mapping out the customer onboarding journey to include KYC solutions (automated KYC, corporate KYC) and global anti-money laundering solutions.
AI-enhanced customer onboarding improves case management and analytics reporting. Effective AI-supported enhanced due diligence makes risk assessment for corporate KYC faster and safer. Automation works to reduce background searches and ID validation but all of this can only function optimally with supported up-to-date, relevant data.
Even the world’s best marketing team needs data to back up the creation of any customer onboarding strategy. This means improving your data collection, analysis, and management or partnering with ID verification services that can provide access to the relevant data.
IDMERIT’s TEAM of API’s
Artificial intelligence is a great way to ease many of our everyday activities. Through machine learning guided by advanced APIs and backed with the latest optimized data IDMkyX platform, a suite of identity verification solutions is ready to tackle all KYC/AML compliance issues. We have the most innovative, technologically advanced fraud prevention solutions and risk compliance services that can handle global anti-money laundering, mobile ID verification, and online KYC verification.
From providing seamless customer onboarding to the small business owners to assessing risk during UBO verification incorporating KYC, we have a variety of identity verification services on our IDMkyX platform to suit any automated identification needs. Our ID verification solutions are recognized and renowned among top Fortune 500 companies and the banking industry, ensuring your company is in the best hands for efficient and professional service. As a current member of the Forbes Technology Council, you can be sure we have the industry-leading technology to back up our services.
As you recall, APIs are human-created, therefore their functionality still needs human intelligence to maximize their performance. Artificial intelligence can only do as well as your digital identity management strategy is planned. And this is where IDMERIT stands out from the competition. We have APIs for each stage of the onboarding process, can supply the relevant data to your marketing team, and make recommendations for your digital identity management strategy.
Let’s Prove it! Contact us today!