The world’s financial institutions are increasingly being targeted by criminals. These crimes cover a wide range of activities, from forgery and counterfeiting to fraud and money laundering.
Financial institutions rely on anti-money laundering (AML) compliance practices to forestall the occurrence of such crimes.
In order to forestall illicit activities like money laundering, terrorism funding, and other illegal financial transactions, financial institutions must use AML compliance practices. These procedures, designed to protect the honesty of anti-money-laundering rules, have been in use for quite some time. However, in recent years, financial institutions have increasingly looked to technology in order to improve their AML compliance procedures.
Technology has been widely adopted in AML compliance practises in recent years to increase productivity, enhance accuracy, and decrease overhead expenses. This article will focus on the use of technology by financial institutions around the world to implement anti-money-laundering compliance procedures.
RelatedPosts
Read also: We Must Employ Technology To Fight Crime In Nigeria – Defence Minister
Learning Machines and Synthetic Intelligence
A growing number of banks and other financial institutions are using machine learning and AI to ensure they are in compliance with anti-money laundering regulations. These systems help financial firms spot and prevent potentially illegal behaviours, including money laundering and other forms of financial misdeeds.
In order to make sense of massive amounts of data, such as customer transactions, account details, and consumer behaviour, machine learning and AI systems employ complex algorithms. The analysis allows the systems to spot irregularities and patterns that could point to criminal intent.
The effectiveness of these systems in identifying anomalous behaviours can also be enhanced by the use of historical data. Some aspects of anti-money-laundering compliance are being automated with the use of machine learning and artificial intelligence.
Financial institutions can benefit from automation since it helps them save time and money while also increasing the precision of their AML compliance procedure. As a result, fewer people are needed to make the system run well, which frees up valuable resources.
Laying Down Customer Due Diligence and Know Your Customer Policies
The Know Your Customer (KYC) and Customer Due Diligence (CDD) processes are crucial parts of AML compliance procedures. The prevention of money laundering and other illegal actions requires financial institutions to confirm the identities of their customers, evaluate the risk posed by those customers, and keep a close eye on their accounts 24/7. Verification and monitoring in the traditional KYC and CDD processes are performed manually, which can be both time-consuming and error-prone.
The Know Your Customer (KYC) and Customer Due Diligence (CDD) processes are increasingly being automated with the help of technology. For instance, biometrics are being utilised to confirm a customer’s identification.
Note that AML compliance is the overarching goal, and KYC is merely one step financial institutions take to get there. However, the two names are frequently confused, with no clear understanding of the distinction between them.
You may read an article from AU10TIX that will offer you a thorough explanation of the distinctions between KYC and AML and how they function together if you’re interested in learning more about this topic.
Cybercrime Typology in Nigeria: A Sign of Industrialisation Part 1
Technology Behind Blockchain
The distributed ledger technology used by blockchain can facilitate safe and transparent transactions between any two financial organisations, including banks.
Financial transactions can be recorded securely and transparently using blockchain technology, which is being employed in AML compliance practises. With the use of this software, banking institutions may instantly communicate transaction data, which speeds up and streamlines the anti-money-laundering compliance procedure. In addition, blockchain technology aids in enhancing the precision of AML compliance procedures. This system generates a permanent record of all transactions that can never be changed or erased. This function makes it more challenging to falsify records of financial transactions, hence aiding in the prevention of money laundering and other illicit acts.