According to the U.S. Treasury USD 300 Billion of illicit proceeds are laundered in the financial system every year and the United Nations office on Drugs and Crime (UNODC) states that only 1% of these illicit proceeds are taken into account. Money laundering has changed and evolved rapidly in the digital age and in order to keep up with the dynamic times, banks and financial institutions need to evolve too and step up to combat threats digitally. Hence, it is imperative that they act and opt for a digital-first approach to combat money laundering to be more vigilant online.
Money laundering is now trade-based and more organized than ever
Economies in Asia are export oriented, hence trade-based money laundering practices are much more prevalent in such economies. Trade-based money laundering involves the usage of trade instruments like fake invoices, fraudulent letters, and various documents to hide the movement of money. In such scenarios, where the crime is so organized and well planned, the use of Artificial Intelligence can be a great asset and a game changer. AI can be used to find and track fraudulent practices in such export-oriented economies. It can be useful when looking at dual-use goods monitoring, price monitoring, vessel tracing and screening of trading partners. It is vital for banks to constantly think out of the box and look for innovative ways to combat financial crimes.
Financial institutions should consider a shift from the traditional to modern and innovative technology
The time for legacy systems and outdated practices have passed. It is time for financial systems to switch to intelligent automation to secure themselves. Money laundering techniques have evolved, and digitalization and automation can be the much-needed defense to fight cyber- crimes. Cutting edge anti money laundering systems can change the way investigations are carried out. Automation can expedite important processes and make them seamless.
Digitalizing Anti Money Laundering (AML) methods need to be an ongoing and continuous process
The process of money laundering is a continuous and ongoing activity. People and institutions behind such an organized industry are ceaselessly striving to derail financial institutions. Hence it is crucial that anti money laundering methods are also constant and continuous. Banks cannot stop and lay low when it comes to protecting themselves and be compliant to regulatory requirements.
Upgradation is key for financial institutions when tracking illicit money flows
Money launderers deploy many high-quality counterfeit IDs and ransomware globally to extract illegal ways to launder money. Financial institutions need to make an effort to constantly upgrade their systems and delve deep into how they can use increased digitalization to protect their systems. Research shows that upgraded technology has a higher rate of combating money laundering frauds. Financial regulators constantly push for banks to upgrade their systems with high end algorithms and models so that they can keep up with the criminals who ride on the digital wave to commit frauds. In their battle against cybercrime, banks need to be able to leverage upgraded digital technology to safeguard their interests and that of their clients’. Banks and financial institutions can either sink or swim and the obvious choice would be to digitalize AML practices.
Digital verification or KYC is considered one of the safest options for banks
With over a hundred branches all over the world, banks cannot verify customers the traditional way. It is necessary that they adopt digital tools and techniques to know their customers. It is not practical for banks to expect consumers to visit the branch since retail visits to branches have significantly dropped. According to the latest figures, mobile banking transactions have risen to 121%. It is important for banks to adopt digital verification processes to secure their interests. Furthermore, it is impractical for banks to expect their employees to spot sophisticated forgeries. Taking all the aforementioned factors into account, it is the need of the hour to switch to digital KYC.
Transaction Monitoring is an integral part of AML
When securing their transactions and customers’ interest, banks and financial institutions should not overlook the benefits provided by transaction monitoring. Transaction monitoring is a pivotal step in deploying AML. The transaction monitoring software is capable of spotting suspicious patterns and dubious practices exposing the problem at an early stage. Automation with machine learning drives the transaction monitoring process and with the assistance of such smart software banks can easily eliminate fraud, malpractices and money laundering.
Riding the digital wave
Regulations regarding AML and KYC are becoming more rigid by the day, and in the wake of large-scale data breaches banks are left with no other option but to ride the digital bandwagon to protect themselves. Harnessing technology such as mobile verification, digital ID verification, biometric authentication, etc. banks can help customers with seamless digital experiences while still protecting them. Digitalizing can also prove to be a low-cost affair in the long run for banks and the benefits are manifold. New enrollments can be faster, easier and more convenient for both consumers and banks. Oracle’s OFSAA is an advanced machine learning and AI based platform to digitalize AML within banks and other financial institutions.
With ever increasing breaches and financial terrorism, regulatory authorities are constantly pressing for stringent KYC and transaction monitoring measures. Hence banks are under immense pressure to comply and there is no better way other than digitalization to tick every box related to their safety and security.