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 such as The Bank Secrecy Act in the U.S. mandate that banks take a risk-based approach and screen customers to ensure they’re suitable to do business with.
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. Identity Verification
The concept of “know your customer” (KYC) is a key component of AML practices. KYC is the process by which institutions a) verify the identities of customers and b) evaluate the risk of working with them. The first step — identity verification — is absolutely essential, as money launderers and sanctioned individuals will often try to use a false identity to avoid detection.
But many identity verification solutions are inadequate, creating too many false positives and friction for legitimate users while letting too many fraudsters and financial criminals slip through. That’s why it’s crucial to use a highly accurate solution like Jumio Identity Verification during onboarding.
2. 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.
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.
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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 automated identity verification and AML screening. It is extremely powerful when deployed properly and can automate AML processes, cutting down on inefficiencies and human error.
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 screening system.
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 assessment 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.
Updated: March 13, 2023