Utilising AI to tackle rising financial crime

November 25, 2022

Pressure from regulators to eliminate money laundering and sanctions on Russia is accelerating plans for AI.

Falling economic growth and rising interest rates are impacting business models and forcing some to rethink their hiring plans. Despite a surge in development, fintech isn’t immune from these impacts, but those specialising in AI monitoring for compliance on transactions remain an essential service from many financial groups. Since the 2008 financial crisis, the demand for compliance checks accelerated as financial institutions faced significant fines for making errors. In previous years, finance-related businesses attempted to maintain pace with continuous changes and stringent regulators by employing thousands of research to manually compile information.

Fast forward to today, businesses are utilising machine learning tools to gather thousands of data sources and combine them. Global fines for anti-money laundering breaches have been increasing quickly, reaching $2.2 billion between 2019 and 2020, a rise that put financial services companies worldwide on high alert for potential cases of non-compliance.

The battle against terrorism and fraudulent activities has triggered a broader clampdown on money laundering, headed by the Intergovernmental Financial Action Task Force and Moneyval, the Council of Europe’s money laundering body. The recent sanctions on Russia after its invasion of Ukraine have escalated regulatory compliance to the top of corporate priorities. Digital finance businesses see a challenging future, emphasising increased fraudulent activity and a demand for financial services businesses wanting to maintain a grasp on digital crime. All those in the industry agree that technology has a critical role in managing compliance and fraudulence. Technology is vital in determining complex money laundering schemes, mining big data sets for terrorism financing activity, and is essential for criminal activities associated with cryptocurrencies.

Financial business, can and sometimes do develop their solutions, especially the larger groups, which collectively invest billions every year in technology. Furthermore, new competitors in the AI and machine learning industry are emerging. RegTech company, ComplyAdvantage believes their advanced technology will enable them to maintain a strong position within the market shortly. Marcus Swanepoel, co-founder and CEO of cryptocurrency platform Luno, explains that his business initially developed its system for compliance checks. It then switched to traditional providers, which rely more on manual processes. It finally switched its attention to ComplyAdvantage because of its higher accuracy and reduction of false positives, enabling the team to focus on customers with the highest risk. Similar to other tech businesses, ComplyAdvantage has launched a new product using AI to identify hidden risks in transactions. The tool enables companies to detect less obvious risks across multiple industries. With the growing potential of fraud, increasing regulation and the rise of new technology, the demand for compliance and anti-money laundering services for all industry professionals shows no sign of slowing down.

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