Jun 18

Using new data techniques in financial crime compliance

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 (AML) efforts on crunching data more efficiently.

• The latest technologies incorporate artificial intelligence (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-your-customer (KYC), raising expectations of bank processes.

It pays to know your customers.

Authorities around the world are keen for lenders to develop strong 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. “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.

“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 AML 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.”

The full article is available on the Risk.net website (subscription required)

This topic will be further explored in the Compliance stream at Sibos 2018 Sydney. Check out this year’s sessions on Sibos.com and register now.