The intensity of financial crime has intensified with the passage of time and regulatory bodies are trying their best to impose strict anti money laundering regulations on all financial institutions. Financial institutions tend to employ anti money laundering programs to verify, screen, and continuously monitor users and transactions which ultimately ensure the compliance with regulations. Integration of technology in RegTech solutions has emerged as a powerful tool in this process. After the pandemic, the adoption of customer onboarding got accelerated by driving the need for efficient RegTech solutions. According to an estimation of Deloitte’s 2021 AML/CFT Regtech report, almost 90% of retail banks are leveraging or planning to leverage RegTech for remote customer onboarding.
The capabilities of RegTech solutions have been enhanced by advancing in computing power and analytics. On the other hand, artificial intelligence excels at identifying patterns and anomalies in transaction monitoring while graph databases help to decode hidden relationships between parties. Global regulatory bodies are supportive of the exploration and adoption of RegTech solutions for anti money laundering compliance despite the regulatory challenges and ethical considerations.
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How RegTech relates to AML compliance
RegTech is considered to be a mix of regulatory and technology which utilizes advanced tools like artificial intelligence, machine learning, and big data analytics to optimize regulatory compliance to streamline the processes such as customer due diligence, transaction monitoring, risk assessment, and suspicious activity reporting. RegTech firmly empowers financial institutions to enhance their efficiency, reduce errors, and stay ahead of evolving financial crime at the same time.
- Identity verification
- Transaction monitoring
- Record-keeping and report filing
Real-World Applications of RegTech AML
Deutsche Bank’s Use of AI in AML Compliance
Deutsche Bank utilized RegTech solutions which are powered by Artificial Intelligence solutions to enhance its transaction monitoring processes by reducing false positives. At the same time, Deutsche Bank enabled its compliance teams to focus on high risk cases with the help of features like real time insights. Such a feature provided solutions that improved the Deutsche bank’s ability to detect and report suspicious activities actively.
HSBC’s Collaboration with RegTech Providers
HSBC collaboration with Regtech holds a significant value when it comes to enhancing its Anti money laundering framework. It worked by partnering with multiple RegTech firms as HSBC has automated its KYC and transaction monitoring processes to streamline onboarding and improving risk assessment. Such a proactive approach helped HSBC a lot to maintain regulatory compliance and protect its reputation.
Use cases for RegTech in AML
When it comes to the solution of RegTech, it can offer substantial benefits to financial institutions by streamlining BSA and AML compliance at the same time. RegTech can be a big game changer when it comes to profitability and customer experience simply by avoiding costly fines which exceeded $4 billion in recent years.
Customer identification program (CIP)
To comply with the Global guideline for financial institutions , it is obligatory to execute customer identification procedures that streamline the process by utilizing government ID verification and document verification to verify customer identities accurately and efficiently.
Features of Advanced anti money laundering software has the ability to analyze uploaded documents, extract data, and compare it to information provided by the customer. This brief feature helps to ensure the authenticity of the documents and prevent fraud.
Feature of Flexible RegTech solutions allows the institutions for the margin of customization and automation of the verification process that enables the addition of extra security measures like selfie checks or database verification based on risk assessments. Such solutions also provide support to the latest digital identification documents, such as mobile driver’s licenses and e-passports as well.
Customer due diligence (CDD)
The feature of customer Due Diligence (CDD) simply builds upon initial customer identification (CIP) by conducting ongoing risk assessments as it also includes screening against OFAC sanctions lists, SDN lists, and PEP lists, as well as conducting adverse media checks and verifying addresses, email addresses, and phone numbers. Moreover, social media monitoring and IP address lookups can provide valuable insights as well.
RegTech solutions can provide an aid to streamline the CDD process by automating screenings and enabling risk based assessments but high false positive rates can hinder the efficiency.
Ongoing transaction monitoring and risk assessment
It is interesting to know that artificial intelligence driven RegTech solutions can amp up the process of transaction monitoring, reporting, and record-keeping. The model of Machine learning can effectively identify unusual patterns in customer behavior and transaction history then link analysis tools which can uncover hidden relationships between individuals and entities at the same time.
