In recent years, the Financial Services industry has advanced considerably and is currently in the midst of a great digital transformation. Accelerated by COVID-19, consumers quickly turned away from physical cash to the likes of online banking, embedded finance and e-commerce – digital solutions have been brought to the fore within the finance sphere. As demands continuously evolve, those working within payments must quickly adapt to stay in touch.
That said, the pandemic held up the mirror to businesses, highlighting internal inefficiencies and outdated practices. Despite impressive growth, Financial Institutions are no exception to this. In fact, Banking Circle’s recent whitepaper revealed all FinTechs and 99% of Banks have technological skills gaps in their organisation.
Missing the mark
A technological skills gap is a big disadvantage when it comes to optimising company growth and gaining a competitive edge. But there is also another issue that can be exacerbated by a lack of the right skills. The rapid growth in digitalisation has been matched by criminal tactics which are fast evolving and becoming increasingly hard to spot with the naked human eye. This has made it easier for criminals to go under the radar, undetected. Consequently, anti-money laundering fines have rocketed to almost $1bn over the first half of 2021, highlighting the urgency for greater compliance measures.
Though the automation in anti-money laundering (AML) has improved efficiency, traditional rule-based approaches to transaction monitoring are outdated. The use of static behavioural rules just don’t cut it anymore, capturing only one element of the transaction. This means the industry sees false-positive rates of 97-99%, which is simply not good enough.
To combat money-laundering, organisations require advanced, emerging technologies such as artificial intelligence and machine learning (AI & ML). These hold the key to detecting false-positive rates, with the ability to highlight patterns and red flags that would usually go undetected during human analysis, all while alleviating admin heavy processes too.
It is, therefore, unsettling to learn 50% of CIOs and CTOs consider AI & ML to be major skills gaps in their organisations. This is particularly troubling given Financial Institutions are subject to significantly more regulation than other businesses, meaning there is little room for error when monitoring for inaccuracies and being outsmarted by savvy criminals.
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Education and attitudes
In a bid to narrow the gaping technological skills gap, more must be done to help Financial Institutions understand how the adoption of AI can be part of the solution for AML. Without expertise, it can be easy to not fully appreciate the levels to which technology can help, meaning organisations don’t truly understand the risk of not using it. It’s a bit like someone who knows they can’t swim but has no desire to go near the water, not viewing it as a limitation. However, if they fall into a river they’re going to need help.
Teams must consider the bigger picture when it comes to the role of AML and compliance, thinking holistically about the wider digital transformation that’s happening across the industry and how it fits. This must come with a change in attitude. It is not a measure to replace humans with robots, but rather to empower individuals with tools that alleviate admin-heavy processes, whilst enhancing fraud detection far beyond human capabilities. This in turn will free up human resources to focus efforts elsewhere.
Realistically, however, the time and money required to conduct complex internal digital transformations and develop technology will not suffice in the arms race against criminal masterminds. For those working within Financial services, who want to be one step ahead, there is a need for outside expertise. Third-party providers of AI Payments technology and cloud infrastructures can complement in-house set-ups. This provides financial organisations with holistic deployments, supported by advanced technology which has already been developed and fine-tuned.
Ultimately, outsourcing and collaborating with external partners already equipped with the technological skills and resources is the fastest route to tackling some of the big challenges Financial Institutions face. They gain access to expert talent pools that would otherwise take years – and huge investment – to build up in-house.
Written by Livia Benisty, Head of AML, Banking Circle