Technology is going to play a significant role in simplifying the anti-money laundering (AML) process. Money laundering around the world makes up about 5% of the global GDP, amounting to around 2 trillion USD. For anyone who deals with large sums of money—banks, financial institutions, cryptocurrency exchanges and more—it is in their best interest to track and keep abreast of current AML trends.
Recently, technologies have caused many new sectors to blossom. From fintech to regtech, there are so many new sectors emerging because of advances in technology. The technology this new industry is providing aims to address problems industries like healthcare and finance are facing and provide innovative solutions to meet their needs. Many of the challenges they face can be addressed by emerging technologies like AI, NLP, Pattern Recognition, Semantic Engines, Machine Learning, automated Identity verification.
Specifically within banks and financial institutions, we will see this sector adopt next-generation software and tech tools to run KYC and AML compliance checks. Identity verification will become a mandatory check as regulations change and become more strict.
AML Compliance is Mandatory
These emerging technologies could be the difference between financial success and financial ruin. Failing to meet AML compliance laws can lead to costly fines. Since 2009, various banks have received over $342 billion dollars in fines for AML noncompliance. Recently, the Danske Bank has come under scrutiny and is currently at risk of being fined $8 billion dollars in relation to a money laundering scandal. ING was also recently fined $900 million for failing to comply with AML laws.
As regulations become stricter, it is in a company’s best interest to be compliant. One way to do this is through the adoption of new technologies. These technologies aim to simplify the AML process. They also aim to simplify the Know Your Customer (KYC) process, which is a part of AML. Technology offers a way to address many of the pain points in current AML procedures.
Here are some key AML trends to watch out for in emerging technologies. These technologies aim to provide more efficiency and robustness to the existing KYC and AML compliance process. By simplifying the process, companies will be more equipped to mitigate risk, fight fraud and prevent money laundering.
- Biometric Analysis: The use of biometric technology is on the rise. It provides a safe, secure and reliable way to identify individuals. Biometric technology will help decrease data breaches, by reducing the number of compromised identities within a secure system. Currently, 81% of major data breaches can be traced back to a compromised identity. Incorporating this type of technology into a robust KYC and AML process can maintain account security, prevent criminals from performing financial crimes, and assist in upholding a company’s reputation.
- Unstructured Data Analysis: A major pain point in KYC compliance comes from unstructured data. Many firms do not know how to deal with this data. Tools, software, and framework are being developed to manage unorganized data to increase compliance.
- Automated Watchlist Screening: For many institutions today, watchlist screening is a manual process. Automating this process will improve its efficiency. Artificial intelligence offers a way to perform this screening without creating human error. Its use is expected to go mainstream.
- Automated Client Risk Assessments: To perform a risk assessment of their customers, many companies rely on transaction screening. They monitor all the transactions of their customers and monitor for irregularities. This process is ineffective at noticing all types of money laundering, especially in account takeover situations. New technologies exist that aim to deal with these issues and make transaction monitoring more effective.
- Multilingual Text Analysis: Major developments are expected in the area of text analysis. This will simplify data entry since the text in a variety of different languages will not need to be converted to one standardized, readable format. This will result in databases with inputs from many different countries in a variety of languages. Data analysis will expand immensely because of these new capabilities.
Financial institutions, in particular, can gain immensely by leveraging new technologies for AML and KYC. These technologies provide ways to make AML more efficient, decrease labor costs and improve customer experience. The AML trends mentioned above will become a core part of the next generation of AML and KYC techniques. These technologies offer a way to enhance efficiency, thoroughness and confidence levels in the entire process.