Financial institutions are central bodies to manage the flow of money through a legal system. Due to its importance in the legal system, money launderers exploit the system to clean their black money. To control any illegal money moving through the banks, anti-money laundering analysts are trained on anti-money laundering tactics. These individuals are legally bound to report any suspicious activity that would turn into financial crime. However, various financial institutions have integrated sophisticated solutions to maintain anti-money laundering (AML) requirements for banks. It puts criminals in a tough spot, as the AI-powered solution helps in detecting and preventing criminal activities with greater accuracy.
The old method to stop money laundering attempts was done manually which was relatively expensive and required spending a lot of time. Most often money launderers used to skip right through the fingers of anti-money laundering specialists.
Changes with AML in Banking
Banks are obligated to meet the compliance requirements as required by the regulatory bodies of their respective countries. It means that banks could prevent any transactions from their customers that are attempting to launder money. In these cases, banks would even decline to have enrolled these users.
Facing Fines for Being Non-compliant
According to Bob’s guide, “Almost $8.14 BN in fines were served globally in 2019 due to noncompliance with AML regulations”. Banks spend billions of dollars to stay compliant with AML policies and regulations. However, they are fined a big amount for their noncompliance. It requires organizations to rethink how they stay in AML compliance. As criminals are finding new ways to fool banks – the situation seems dire if financial institutions don’t step beyond their counterparts.
Current supervisory regimes are lacking more sophisticated methods to tackle money laundering scams. In these cases, it seems that banks should stop these fraudulent attempts by integrating AI-powered solutions.
The question arises: How do banks provide frictionless customer experience through an effective anti-money laundering (AML) method? Is it even possible to completely stop money laundering attempts?
Importance of Implementing AML (Anti-Money Laundering) Procedures
More checks are required to improve AML and prevent fraudsters from backing up. By integrating the right solution within the system that requires few verification steps could potentially stop any money laundering attempts. Although striking the right balance with an effective fraud prevention method to create a positive user experience is a win-win situation for everyone. However, obviously, it would result in a disadvantage for criminals.
As it would eventually address all pain points that financial institutions have to bear. So, it’s advised to put up stringent AML procedures in the first place. With AI-powered identity verification solutions, financial institutions can ensure they are using best practices to keep criminals at bay and security for real customers. It offers more accurate results than manual verification.
As advancements are taking place in new technologies, it’s also quite important to update the AML procedures. Deploying systems that would check the risks associated with onboarding a customer would present the likelihood of falling into a malicious attempt. These safety measures show the importance of an institution to filter out any bad actors. The solutions are easy to integrate and maintain within the system.
Making Financial Institutions More Secure With AML
Banks should avoid risking their security by keeping up with AML and KYC regulations. The financial institutions should follow the following tips to meet with compliance.
It’s important for banks to run Know Your Customer along with AML (anti-money laundering) checks on their customer accounts. Keeping up with AML and KYC regulations is important for banks or they could risk running into security issues. So, it’s vital for banks to follow these steps for meeting the rules of compliance.
- Performing background screening of the client’s account.
- If someone is on a list of politically exposed people (PEP) then give them a high-risk score while onboarding.
- During an initial step of verification, ask clients to provide different ID documents to run it through AML and KYC checks.
AML in banking is mandatory in banks due to some regulatory obligations. Financial institutions can make their systems stronger by implementing AI-powered AML solutions. The solution helps in scanning through various lists to screen a person’s background. Further, it also offers banks a secure environment without fear of paying heavy fines or penalties.