By Andrew Doyle, CEO of AML compliance software, NorthRow
Financial crime is on the rise and the stats are alarming. In the UK alone, 64 percent of businesses (according to data from the Global Economic Crime Survey) have experienced fraud, corruption or other incidents of financial crime within the last 24 months, while ONS stats show there were 3.7 million incidents of fraud in England and Wales in the year ending December 2022.
So it’s no surprise that financial institutions and other regulated firms are under increasing pressure from regulators (and the ever-evolving legislation they must adhere to) in the battle against dirty money. Regulators are imposing crippling fines for any compliance breaches, not to mention the significant reputational damage that comes with non-compliance.
Historically, financial firms have employed large numbers of staff to combat money laundering, but regulators are now expecting to see digital solutions in place to counter the risk of financial fraud, and with good reason. Technology can be the deciding factor in the war on financial crime and here’s why:
Better risk detection
Technology platforms can analyse historical data to predict potential incidents of money laundering, enabling organisations to take preventive measures, while also identifying unusual patterns or changes in customer risk profiles, which may also indicate suspicious activity.
Advanced analytics can help companies identify complex patterns across large datasets, making it easier to detect networks of fraud. It is also possible to assign risk scores to transactions or entities based on their likelihood of being associated with money laundering. This helps in prioritising high-risk cases for investigation.
Enhanced customer due diligence
Automated software platforms can analyse customer information, public records, and other data sources to perform thorough due diligence on clients, identifying potential risks or suspicious behaviour before they are signed up.
RegTech automates the process of verifying customer identities and conducting enhanced due diligence on individuals and on companies, ensuring compliance with Know Your Customer (KYC) and Know Your Business (KYB) regulations, both vital components of anti-money laundering efforts.
More accurate identity verification
Biometric verification is a powerful tool in enhancing anti-money laundering and fraud detection. It involves using unique physical or behavioural characteristics of an individual to verify their identity. Traits like fingerprints, facial features, iris patterns, and voiceprints are unique to each individual and are nearly impossible to replicate or forge. This makes them highly reliable for verifying that clients are who they say they are.
Biometric verification can also reduce the number of false positives in fraud detection by providing a highly accurate means of confirming the identity of a customer. This leads to more reliable results and lessens the need for manual intervention.
Continuous and real-time monitoring
Real-time alerts allow for immediate action when suspicious activity is detected. This can prevent or minimise potential financial losses and damage to a company’s reputation. By identifying and acting upon suspicious activities in real-time, financial institutions can reduce the risk of financial losses associated with incidents of economic crime.
Continuous monitoring with real-time alerts can also help refine the accuracy of anti-money laundering systems over time. This reduces the number of false alerts and decreases the need for manual intervention.
To the future
According to data from Capgemini, 68 percent of UK institutions are already looking into real-time anti money laundering monitoring systems to stay ahead of potential threats while 86 percent, says Refinitiv, agree that innovative digital technologies have helped them identify financial crime.
So the data tells us that companies are already heading in the right direction when it comes to fighting fraud, but as the landscape of financial crime continues to evolve, financial firms must ensure they do the same.
By leveraging the right technology, businesses can ensure they not only meet regulatory requirements and safeguard their operations, but also protect their reputations and crucially, maintain that all important customer trust.
