The birth of AML-Tech
Over the last few years, the ‘tech’ suffix has found its way into several sectors. Today, entrepreneurship ecosystems worldwide are filled with various emerging sectors including fin-tech, agri-tech, med-tech, health-tech, reg-tech, and this list is potentially endless. Just add this suffix called ‘tech’ to a core sector, and boom we’ve a whole new category.
At Cenza, we serve banks, financial institutions, consulting firms and legal companies, and therefore, we’re carefully tracking emerging trends in legal-tech, fin-tech and reg-tech. Within the overall regulatory-tech segment, we believe, the usage of cutting-edge technology (think AI, NLP, Pattern Recognition, Semantic Engines, etc.) is going to become main stream in the area of KYC/AML compliance. In this post, we dig deep into what we’re calling the ‘AML-tech’ space, wherein banks and financial institutions adopt next-generation software and tech tools to run KYC/AML processes.
According to research published by PwC last year, Global Money Laundering transactions are estimated to contribute 2 to 5 per cent towards overall Global GDP. And, according to the United Nations, less than 1 per cent of illicit transactions are caught. These numbers are staggering and the only way out to nab these fraudsters is by using technology.
Here, we highlight some of the key emerging trends in ‘AML-tech’ and how it can bring in much-needed efficiency and robustness to the KYC/AML compliance process.
1. Multilingual Text Analysis: Over the next few years, we’ll see major development in the area of textual analysis. It is not enough to be able to crawl through millions of pages of documentation and convert them into pieces of data that can be run through an analytics engine. The next few years will see tremendous development in multilingual text analysis, resulting in input data sources from many different countries and in several languages.
2. Digital Forensics: Identity intelligence, using AI and pattern recognition, is going to be a critical field within AML-tech. Large distributed systems that can process large amounts of hard drive data, mobile data and other data from sensors, will be crucial for identity management. We’ll possibly have large teams of digital forensic engineers working in banks and FIs.
3. Unstructured Data Analysis: One of the greatest challenges in KYC compliance revolves around dealing with unstructured data. Data science and analytics software are largely ineffective with drawing insights from unstructured data. Tools and frameworks to manage unorganized data will evolve into a major area with AML-tech.
4. PaaS for Watch list Screening: Screening of known watch lists, be it within a country and across borders, is mostly a manual process today. Automation of repeatable tasks will help improve the efficiency of the screening process. The process of entity resolution, using AI techniques to tackle real issues like spelling mismatches, usage of alias names by fraudsters and managing exception lists are critical. The role of an AI engine in this process will certainly become mainstream.
5. AI-driven Client Lifecycle Management: Overall, any AML-tech system is only as good as the entire client lifecycle management process. Right from on-boarding and KYC/AML/Tax compliance to data management and the entire digital customer journey, the client lifecycle management software used by banks and financial institutions will go through an overhaul. A clear 360-degree view of the customer, auditable customer due diligence, risk profiles, visual data and regulatory compliance satisfaction levels will all be key features of the central dashboard. The usage of AI in the CLM tool will improve over the years, thanks to high-quality open source AI platforms, learning solutions and availability of AI talent.
Broadly speaking, we’re at an inflection point in the world of KYC/AML Compliance. The 5 aspects of AML-tech mentioned above will form the core of next generation KYC techniques. The only way forward is using technology to enhance efficiency, thoroughness and confidence levels of the entire process. At Cenza, our deep understanding of technology will be at the forefront of our approach to servicing clients in the area of KYC Compliance. Would you like to know more about next-generation AML-tech? Feel free to write to us here.