Why Is AML Compliance So Important?
In the past five years, criminals from all around the world found new ways to tap into the financial market thanks to it being digitized. It is so easy for them to take advantage of technology and use money laundering techniques that were previously thought to be impossible. It is now more difficult than it ever was to trace money so compliance with AML becomes important for all financial entities.
AML systems needed to be upgraded in order to deal with illicit money flows coming from customer data, transaction data, and account data. It is simply impossible for the human officer to rely on the standard eyeball methods. Better models and algorithms were needed.
Nowadays, criminals leverage technologies. They use ransomware, take full advantage of online anonymity and utilize blockchain technology to engage in illegal activities. Businesses have to be fully AML compliant because of countless reasons, with the following needing to be highlighted.
Trade-Based Money Laundering
Many economies are oriented on export so money laundering is very important. This includes activities like using fraudulent letters to get credit, vessel re-routing, money mask movements, and fake invoices. Artificial intelligence is utilized to locate outliners when dual-use goods are monitored, prices are monitored, vessels are tracked and trading patterns are screened. All of these are pivotal development areas.
eKYC
Most countries are advanced when it comes to digital and mobile payments. This is why new technologies are created to tackle what is known as eKYC, which is different than regular KYC. Businesses that only carry out business online can easily onboard customers so that the process is convenient and accurate. Innovation is driven and new interest appears in terms of biometric verification and ID verification. This is a challenge that is particularly important in Asia because of the huge population and the prevalent use of digital and mobile tech.
AML AI
AI is the talk of the town for a long time now and there is a race that happens between lenders trying to operationalize it and apply it. There is huge pressure to make sure that explainable AI is implemented. Lenders need to explain to every party involved why specific cases are flagged and why some cases are missed. AI has a huge value and can reduce false positives. It guarantees better financial crime detection since data keeps growing and it becomes much more complex.
Phonetic Algorithm
There are numerous languages used these days in business. Many do not even utilize Latin characters. Global movements mean that it is quite likely that the money launderers come from other countries and take advantage of the low-security systems implemented by various institutions. In addition, there are many different business practices that exist so money laundering detection becomes very complex. Fuzzy detection tools are needed now to detect the non-Latin characters.
FRAML
Organized financial crime stands out as a huge problem right now, since such criminals prefer money laundering. Lenders need an approach that is applied along the entire enterprise. Lenders have to develop a strategy that combines Fraud and AML perspectives so they stay ahead of the entire competition.
Conclusions
To sum up, AML compliance is important because it stops people from performing dishonest acts, finance terrorism and much more. The technology that is used by criminals is becoming more and more complex. If the business is not AML compliant, according to the law, it is a part of the problem. A company does end up being fined when it is found to not respect AML laws and compliance is not as high as it should be. Protect your business by making sure AML is as secure as it should be.
