Livia Benisty: AI Doesn’t Have To Be Scary – Re-Thinking AML For A Digital Age

Livia Bestily

Financial institutions are subject to significantly more regulation than most other businesses, which can make the compliance processes feel like a burden – let’s just say it’s not exactly a job that children dream of getting when they grow up. However, regulatory methods are absolutely essential in combatting serious financial crime. Knowledge is power, and when it comes to regulation, we need more of it.

The financial services industry is undergoing one of the greatest periods of transformation in history. Traditional banking models prioritising delivery through branch networks are disintegrating, as digital solutions are brought to the fore. The potential of this new world is well understood – it can bring personalised services for customers, faster response times and instant payments, available in real time, around the clock. But all of this is no good if, behind the scenes, Financial institutions don’t have compliance under control. As technology gets more advanced, so do criminal tactics and so we need new technologies to help combat the problem.

While the automation in anti-money laundering (AML) has improved in efficiency, traditional rule-based approaches to transaction monitoring are outdated. The use of these static behavioural rules captures only one element of the transaction, meaning the industry sees false positive rates of 97-99% – this is not good enough.

The future is now

It’s clear that traditional regulation methods just don’t cut it anymore, indeed 39% of Senior European bankers rated regulation as one of three biggest external challenges they face. But companies must not admit defeat – instead, Financial institutions should harness tools that can alleviate admin heavy processes whilst enhancing fraud detection in ways far beyond human capabilities. Enter the era of artificial intelligence (AI).

The utilisation of AI and machine learning (ML) increases rules precision, providing a series of indicators which point to something being higher risk, highlighting patterns and red flags the naked human eye could never spot. This in turn cuts down the false positives, enabling banks to clamp down on fraud.

It’s important to think holistically about the role of AML and compliance within the broader framework of digital transformation across the enterprise. With this considered, and in a feat to change attitudes towards AI and ML, it should be made clear the introduction of AI and ML technology is not a means to replace humans with robots, but instead empower individuals with tools that will reduce operational workloads, enhance efficiency and free up resources for workers to focus on other areas such as customer relationships.


Taking a leap of faith

Despite all the benefits of AI, a reoccurring issue is that many companies are still uncomfortable with the idea of actually using it – or they don’t understand how it fits in with their approach. This desperately needs addressing. There has been a rapid increase in  money laundering over the past few years, indeed during the first six months of 2020, global money laundering fines reached more than $700 million – almost double the 2019 annual total of $444 million. AI and ML could help close this gap.

Relative to industry revenues these fines may appear to be small, but the damage they cause to customer trust and business disruption are vast. It’s essential, therefore, that organisations carefully examine how to curate a successful AML strategy for the digital era.

Cross industry collaboration and adoption of digital solutions is the best way to bring about change. It’s apparent that the way Financial institutions approach regulation needs a re-vamp – we need to be more flexible, more collaborative and more open to using emerging and exciting technologies such as AI. Once embraced on a global scale, these new innovative approaches can be used by financial services providers both nationally and internationally as a collaborative measure in the battle against money laundering.
Written by Livia Benisty, Head of AML at Banking Circle

To find out more about the future of AML, download Banking Circle’s whitepaper: Better by design? Rethinking AML for a digital age