AML & KYC Compliance – 5 Ways AI is Supporting the Fight Against Financial Crimes

Richard M. April 17, 2019 7 minute read

01 Reforming AML & KYC Compliance Structures for Financial Institutions
02 How has AI Transformed AML & KYC Compliance

Reforming AML & KYC Compliance Structures for Financial Institutions

The capabilities of artificial intelligence (AI) are being pushed to unprecedented levels in the past few years. The banking and financial services sector has reaped extensive benefits from the transformation brought on about by AI in the landscape of IT solutions. The Anti Money Laundering (AML) and Know Your Customer or KYC compliance, in particular, has been made more dynamic and effective through AI-enabled systems. The financial sector produces huge amounts of data, which is what AI works best with. It can mine high volumes of data within seconds and produce risk-analysis of clients, that would otherwise take days or even weeks for the compliance staff to produce.

In the day and age of high connectivity, people expect their services to be fast and efficient. AI has proved to be monumentally adept at performing redundant tasks that require hundreds of man-hours. This has enabled the banking staff to focus their efforts towards more value-oriented tasks. With branches in AI including machine learning and natural language processing (NLP), financial institutes can transform their Client Lifecycle Management (CLM) by automating different procedures that require repetitive labour and are more prone to human error.

How has AI Transformed AML & KYC Compliance

Through NLP technology, AI can now process vast amounts of data provided in different languages which enhances the KYC process for banks. Different documents can be scanned through an automated system, which then reads and processes the information, allowing for a faster data entry process. Additionally, it can also go through external sources with increased efficiency. This allows banks to transform their entire client onboarding procedures to be faster and more dynamic.

The financial sector also has to adhere to a number of anti-money laundering (AML) regulations. AI is enabling financial institutions to implement systems that can perform a risk analysis of high-risk client profiles within seconds. By sifting through large volumes of data, machine learning algorithms are able to detect suspicious activity in client transactions, therefore identifying high-risk clients instantly. Other systems are able to track changes in the regulatory landscape around the world and provide prompt updates to the company. Banks now are also able to screen individual clients through global AML sanction lists through AML screening services provided by an AML and KYC solution provider like Shufti.

Here are some of the ways AI is helping to improve the AML/KYC Compliance process;

Developing Comprehensive Risk-Profiles of Clients

Artificial intelligence has been able to digitise the process of evaluating client profiles. These systems can now provide banks with different levels of risk profiles of clients depending on their history and credit score. The profiles can be classified as high, low or medium risk according to the client details. This has made the process of enhanced due diligence (EDD) more efficient for banks, allowing to screen out high-risk individuals.

Establishing Ultimate Beneficial Ownership

Under the recent AML and counter-terrorism financing directives, institutions like FATF have introduced UBO legislation, wherein financial institutes are required to establish the ultimate ownership of assets. Compliance departments are required to go through complex data in order to sift through shareholders, beneficial owners, directors and other associates linked to a business. AI has enabled the compliance staff to establish UBO for different clients through enhanced systems. It can read and process vast quantities of data wherein it is able to produce comprehensive risk profiles of clients. As AI technologies are progressing rapidly, these systems will continue to gain consequence over the coming years.

AML Screening

Financial institutes around the globe are increasing focus on screening clients through an AML screening process, thus improving the AML and KYC compliance process. Outdated systems have been known to produce an unusually high number of false positives, thus piling up unnecessary work for compliance managers. A KYC solution like Shufti can provide real-time screening of clients through global AML watchlists through an AI-enabled system.

Faster Client Onboarding Process

As people are increasingly coming to rely on technology, and are getting used to services that are easily accessible, banks are trying to keep up with the tech revolution. By installing AI-powered systems, client onboarding procedures can be made more efficient as well as effective. Such systems have lent increased capability to banking systems and compliance processes, in particular. Advanced monitoring through AI and real-time screening and alerts can mould the onboarding of clients to be faster than ever before.

Keeping Up-to-Date With Compliance Regulations

Systems in AI like machine learning algorithms can detect patterns in data within seconds. The AML and KYC requirements around the world are constantly changing. Regulators dole out new laws and requirements every year in an effort to curb money laundering and financial crimes. This makes the tasks of a compliance team more complicated and dynamic. AI is able to analyse and detect patterns in data, thus keeping compliance requirements up to date.

With Shufti as a KYC service provider, banks and financial institutes can revolutionise their AML and KYC compliance procedures. It provides digital KYC through document verification, facial biometric authentication and AML screening procedures. By implementing KYC as a service, banks do not have to invest separately in developing AI solutions from scratch.