Artificial intelligence and machine-learning can help crunch data more efficiently
The following is an extract from a recently published article on Risk.net.
Need to know
- Financial firms are focusing anti-money laundering efforts on crunching data more efficiently.
- The latest technologies incorporate AI and machine learning, but data analysts must still interpret the outputs.
- Failures in AML can cost banks dear in regulatory penalties, among other financial losses.
- Authorities in the US and Europe are tightening the rules on know-yourcustomer, raising expectations of bank processes.
It pays to know your customers. Just ask US Bank, smarting from a $600 million fine for anti-money laundering violations in February. Or Deutsche Bank, fined $630 million for similar failings last year.
Authorities around the world are keen for lenders to develop strong Know Your Customer (KYC) procedures, and are prepared to levy big penalties on banks that fall short.
“Although technology is good at automated search and data analytics, there is always room for human interpretation and intuition,” says Tony Wicks, head of screening and fraud detection at SWIFT, a financial messaging service. “The ultimate decision point will always sit with a human. Technology is there to help and support human decisions, not to replace them.”
Regulators agree. Under Europe’s new data protection regulation, known as GDPR, firms that use data to make decisions on, say, lending must build in an element of human judgement.
Technology is there to help and support human decisions, not to replace them.
Tony Wicks, head of screening and fraud detection, SWIFT
“By improving the quality of AML and fraud detection systems, they can be more effective, reducing the noise, ensuring more of the right kinds of financial crime risks are identified, resulting in an increased number of SARs that provide real value and can be acted upon,” Wicks says.
An effective, up-to-date compliance process must also inspire confidence among fellow banks. Wicks says: “It is all about transparency now. Banks interacting with other banks want to know that they have good anti-money laundering processes in place and that they can trust you.”
The growth of new technological opportunities will allow experimentation across small and large firms. Wicks says: “Smaller firms can be more agile in adopting new approaches and using technology to protect and enable their business.”
Anna Gilmour, 23 May 2018, Risk.net
The full article is available on Risk.net website (subscription required)
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In an increasingly global economy, financial institutions are more vulnerable to illicit criminal activities. Know Your Customer (KYC) standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing.