What Is The Role of Technology In Anti-Money Laundering Compliance

This article revolves around the role of technology in anti-money laundering compliance and KYC processes. So let us dive deep into it so that you can also start leveraging the power of technology to reduce the risk of any sort of fraudulent activities.

In today’s modern world, the state of technology is constantly changing and undoubtedly for good. You name any industry that can survive without modern technological suits, and we bet you would not be able to name anyone.

It is simply because all the industries are now focusing on minimizing the manual efforts and incorporating automation, artificial intelligence into their systems.

Financial industry or institutions are more prone to risks, and hence, giving space to manual steps calls for some unwanted circumstances that might result in irreversible qualitative as well as quantitative damages.

How Does Technology Ease AML And KYC Processes?

Anti-money laundering or AML includes regulations and laws that are aimed to prevent any sort of financial crimes or manipulation. Every country has a differentiated and clearly established set of AML regulations or rules.

While knowing your customer or KYC is just a part or action of the steps undertaken in order to prevent any sort of money laundering activities.

KYC includes various practices that recognize the customer or a business enterprise at the time of the first transaction or practically, even before that.

In addition, it requires agents and brokers to be aware of how real estate transactions might be used in illegal financing schemes, along with what steps should be taken in order to detect and deter such activities.

It is a procedure in which financial institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) gather information related to their probable customers. This information includes name, name of the business, address, age, legal identity card, nationality, and stuff like that.

All business enterprises that are prone to money laundering activities should have anti-money laundering compliance strategies. If they do not have AML compliance strategies well defined, they might invite some penalties from the regulators.

However, complying with all such methods might not be easy at first because it incorporates a lot of tedious paperwork and asks for your undivided attention to understand the gist and make all your staff aware of the same in the most effective and efficient manner.

In addition to that, these strategies are updated at regular intervals, and this is the point where the need and importance of technological aid come into the picture. Technological evolution supported by artificial intelligence, machine learning, and big data can exponentially reduce the risk of money-laundering.

How Artificial Intelligence, Big Data, and Machine Learning Can Help You counter Money-Laundering Risks?

Artificial Intelligence, Big Data, and Machine Learning have made tackling financial crime both cheaper and faster. It also has allowed companies to adopt a much more efficient and more innovative approach.

Financial institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs) are now replacing the good old black, and white rules approach with something more focused on the technology front, holistic, and flexible program. These programs will be able to detect any sort of abnormalities in a highly efficient way.

Manual-oriented processes are typically slow. But with the help of automation and (AI) artificial intelligence, these processes have become much quicker and more efficient. Also, the scope of manual error or manipulation is reduced.

In addition to that, financial institutions usually have to deal with loads of data. Now, suppose you consider humans to filter, analyze, and conclude a solution from that voluminous data. In that case, it will take an eternity and still won’t guarantee a hundred percent accuracy and reliability.

If the same process is being carried out by fast, efficient, and accurate software, you will be able to save money and valuable time.

Artificial intelligence can identify patterns of transactions, anomalies & behavior rapidly, allowing the AML compliance professionals to invest their time better analyzing the results, collaborating the findings with other financial institutions, and investigating root causes. and valuable time.

The use of technology is not restricted merely to transaction monitoring. Big data has helped business enterprises move away from simply tracking financial crime at the transaction level but enabling connections to detect the pattern in the voluminous data.

This allows the business enterprise to trace the sources of illegal transactions and activities more effortlessly and effectively.

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Solutions That Ensure Anti-money Laundering And Know Your Customer Compliance

AML Solutions that are supported by artificial intelligence enable you to easily comply with all the laws and regulations along with the scope of minimizing your financial risk.

Here are a few solutions that will allow you to comply with all AML and KYC processes and strategies.

1-Transaction Monitoring

Every transaction that your business encounters on a daily basis involves some sort or level of risk. Hence, transaction monitoring software is the essential requirement for financial institutions under anti-money laundering obligations.

Business enterprises can create their own set of rules without having any prior coding knowledge in order to detect suspicious and high-risk economic activities automatically.

2- Anti-Money Laundering Name Screening

AML name screening software can help you effectively meet all of the basic requirements of sanctions, PEP scanning services, risk-based approach, and can also meet local and global AML compliance policies and keep your business safe from any negatives or risks that may arise as the transactional course continues to grow.

This way, you can also avoid regulatory penalties. With the help of AML name screening, you can even perform Customer Due Diligence or CDD and Know Your Customer or KYC transactions in accordance with the stated obligations.

3- Anti-Money Laundering Transaction Screening

With the help of AML transactional screening software, banks or DNFBPs can check the details of the sender as well as receiver without delay. Enterprises can exponentially reduce the risk of financial crime by tracking the sender and receiver of the transactions with the help of this software.

In addition to that, companies can even create their individual search options along with advanced search parameters. The data collected by this software structures in a way that provides comprehensive results and without having to compromise on the accuracy.

4- Adverse Media Screening

An adverse media software helps the companies to track and monitor any negative news about any of the already existing clients or a potential client. Adverse media screening is one of the essential steps of anti-money laundering and knowing your customer processes.

It basically helps the companies to identify the potential risks and protect them from the same. Adverse media data include news related to terrorist financing, arms trafficking, corruption, money laundering, bribery, smuggling of drugs, violation of human rights, and tax evasion.

Financial institutions can comply with AML processes by performing advanced media screening in addition to PEP scans during the process of customer onboarding.

Final Words

By now, you must be pretty familiar with what is the role of technology in anti-money laundering compliance and how it can make a difference in terms of enhanced efficiency, accuracy, and productivity.

As a result, financial institutions (FIs) and Designated Non-Financial Businesses and Professions are able to protect themselves from reputational losses and regulatory penalties.

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FAQs - Role of Technology In Anti-Money Laundering Compliance

Here are a few frequently asked questions related to the compliance and the effective implementation of KYC processes.

AML technology is a program to help you detect suspicious transactions, store and analyse customer data, and assess customer risks. It facilitates transaction screening, checks suspicious customers against PEPs or Sanction lists, and monitors transactions based on artificial intelligence.

Anti-money laundering technology can help assess customer data, determine relationships between them, identify patterns of transactions, and risk score customers.

Many systems with anti-money laundering capabilities are available in the market to monitor transactions and individuals, investigate and report to the entity.

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About the Author

Pathik Shah

FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)

Pathik is a Chartered Accountant with more than 25 years of experience in compliance management, Anti-Money Laundering, tax consultancy, risk management, accounting, system audits, IT consultancy, and digital marketing.

He has extensive knowledge of local and international Anti-Money Laundering rules and regulations. He helps companies with end-to-end AML compliance services, from understanding the AML business-specific risk to implementing the robust AML Compliance framework.