For many, money laundering sounds like a crime that just happens in shady businesses or on television shows. Sadly, this financial crime is all too common and can plague ordinary businesses, especially financial services and fintechs that allow users to exchange funds.
These businesses and institutions could be used to finance criminal enterprises and provide terrorist financing without their knowledge, leaving them vulnerable to legal action and huge fines. It is of paramount importance that these organizations stay on top of anti-money laundering (AML) technologies, including the latest software and employee training programs.
In this article, we’re going to go through some of the most modern and sophisticated AML technology you need to pay attention to as AML continues to grow in scope.
Technologies For Developing Effective AML Compliance Programs
Developing effective AML programs is not optional. Financial institutions like banks must meet federal regulatory requirements in this area, and using new technologies is the best way to stay compliant.
AML regulations mandate that banks collect customer information and monitor transactions for suspicious activities. Any suspicious activities must be reported to financial regulatory authorities.
The following technologies help to maintain compliance with existing AML regulations and are also forward thinking — sometimes going above what is required for reporting and risk management.
1. Automatic AML Screening
Financial institutions and other high-risk businesses often have thousands of clients. Keeping close tabs on these customers would be nearly impossible without the help of automated AML screening.
AML software programs automatically check clients against national and international checklists. These lists can include global and regional sanctions, watchlists, politically exposed persons (PEPs) and adverse media mentions.
The right AML screening software will minimize false positives with near real-time checks on new customers. This approach minimizes your risk and makes it simple to carry out your due diligence, especially when onboarding new clients.
The concept of “know your customer” (KYC) is a key component of AML practices. KYC is the process by which institutions verify the identities of customers and evaluate the risk of working with them.
With automated screening, you’ll be able to identify high-risk individuals and complete a fair and complete risk assessment. These actions roughly fall under the term “robotic process automation” or RPA, which means using AI “robots” to screen and monitor your accounts for potential money laundering.
Cutting-edge AML screening solutions use AI-powered, automated AML screening to assess risks and perform ongoing monitoring. They should allow customized risk screening against global or regional sanctions and watch lists. And they should use KYC-compliant ID verification to limit your company’s risk.
2. Transaction Monitoring Tools
Governments consider suspicious activity to involve either a single transaction or a pattern of unusual or high-risk transactions. For example, The Bank Secrecy Act specifically requires that financial institutions in the U.S. report transactions of $10,000 or more.
However, financial criminals are well aware of this regulation, so they may use multiple transactions of $8,000 to avoid detection. This means you must often look for complex patterns to detect financial crimes.
Monitoring individual transactions is key to AML efforts, and advanced software makes this task much easier. For instance, Jumio helps banks and financial institutions fight financial crime with its sophisticated AI-powered AML transaction monitoring system.
This AML technology spots high-risk transactions and patterns, which simplifies your AML efforts. And Jumio’s advanced case management system makes it easy to investigate and report suspicious activity. It can even fill in suspicious activity reports (SARs) for you.
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3. Artificial Intelligence Solutions
Artificial Intelligence (AI) refers to machines mimicking human learning. Your computer cannot think the way you do, but it can quickly analyze mountains of data and use algorithms in a way humans cannot.
AI is useful for everything in the financial ecosystem from cybersecurity to data management. Certain financial software uses AI principles that reduce money laundering risk, making your compliance efforts more effective and less time-consuming.
Artificial intelligence is less a tool in and of itself than a characteristic of both automated AML screening and transaction monitoring. It is extremely powerful when deployed properly and can automate AML processes, cutting down on inefficiencies and human error.
4. Machine Learning Solutions
Machine learning is part of AI and refers to software programs that use data and algorithms to recognize patterns in human transactions. Over time, the program can detect changes in customer behavior, which makes it easy to identify suspicious activity.
These programs monitor ongoing transactions and learn to anticipate financial behavior. If a client’s previously unremarkable financial activity changes, the software will notify you of these suspicious transactions. This can include unusually large deposits and withdrawals, sudden blockchain transactions, change in frequency of transactions and more.
Machine learning mitigates your money laundering losses by alerting you to potential issues that you wouldn’t spot otherwise. No large financial concern can afford to have people pour over all their accounts to spot irregularities.
Machine learning also helps reduce false positives by helping to tune your AML rules over time. This allows your compliance team to work more efficiently.
Why Having an Effective AML Program Is Important
Non-compliance with AML can end up in massive costs for your company or organization. Globally, fines in 2020 surpassed $14 billion dollars, with Goldman Sachs and Westpac leading the way. Beyond the fines, non-compliant organizations also risk criminal and civil action as well as a loss of reputation.
Each country has its own regulators and law enforcement specialists dedicated to AML to protect the financial system. In the U.S., for example, companies face the wrath of the Financial Crimes Enforcement Network (FinCEN), which uses its own high-tech methods to ensure financial regulations compliance and catch money launderers.
With the proliferation of money laundering and digital transactions, AML has become increasingly important for both regulators and financial institutions. While these institutions must legally be AML compliant, doing so helps ensure that money laundering can be more preventable.
Using Technology to Fortify Your AML Program
An effective AML compliance program should be multi-pronged and lean heavily on technology. At a minimum, institutions need to designate a compliance officer, create written rules and AML procedures, build a training program for employees and establish a monitoring system.
You cannot hope to stay compliant without help from software like Jumio AML Solutions. Our automated tools help spot suspicious activity, allow you to file the necessary reports and take any other required action.
Financial criminals are more sophisticated than ever. You can only remain safe from their financial manipulations if your AML systems are better than their schemes. Jumio has the tools you need to fight money laundering with automated screening, risk management practices and ongoing monitoring.
Let a Jumio expert show you how easy it can be to integrate our automated identity verification and AML solutions into your onboarding and ongoing monitoring processes. Request more information here and we’ll be in touch shortly.