Innovation, Collaboration and the Fight Against Financial Crime

As money launderers and other bad actors raise their game, along come AI, graph analytics and other increasingly powerful technological defenses

Friday, February 21, 2020

By Jason Somrak


Although financial crime has existed for as long as money has been around, it continues to beset financial institutions. The United Nations Office of Drugs and Crime estimates that as much as $2 trillion is laundered globally each year. Of that amount, less than 1% is currently being seized and frozen.

Today, financial criminals are becoming savvier, keeping up with the latest technologies and controls meant to safeguard our financial systems. At the same time, many financial institutions continue to rely on outdated, time-consuming, rules-based processes for their anti-money laundering (AML) and Know Your Customer (KYC) due diligence. As a result, 2019 saw major banks fall prey to sophisticated money laundering attempts, including Swedbank in the Baltics. These scandals result not only in compliance fines and direct losses, but also long-term reputational damage.

Jason Somrak Headshot
“Advances in technology allow employees to turn their focus to the highest-risk areas,” writes Oracle Financial Services' Jason Somrak.

However, this is not to say that the industry is in a hopeless position. In fact, recent technology advances are giving financial institutions innovative ways to improve their defenses and stop financial crime in its tracks. Here are three financial crime management technology trends to watch in 2020 and beyond.

1. Embrace of Graph Analytics

Whether you realize it or not, we interact with graphs every day. For instance, when LinkedIn recommends a connection to us, or Facebook recommends a friend we might know, these platforms are using graph analytics to index data by relationships and make personalized suggestions. This same technology is increasingly being applied to the fight against financial crime. With graph analytics, financial institutions can map a customer's networks, relationships and interactions with other people, organizations and entities

More than any other solutions on the market, graphs make it easier to visualize patterns and relationships, understand what the data means, identify unusual patterns of money movement and assign a risk value to each, providing financial institutions with the full picture needed to make informed decisions. In 2020, we'll see more banks build off prior investments in robotic process automation (RPA) tools with graph analytics, resulting in a more complete picture around entity resolution processes.

2. AI and Machine Learning Become More Mainstream

As criminals have embraced sophisticated technology, even the large teams of financial crime analysts and investigators employed at banks have struggled to keep pace. Illegal transactions now happen in an instant, making them difficult to detect quickly. Fortunately, artificial intelligence and machine learning solutions are becoming sophisticated enough to complete tasks far beyond merely identifying and flagging suspicious activity. New AI and ML solutions run comprehensive KYC analyses and complete varying degrees of automated decision-making across vast volumes of data. This increases the likelihood of identifying hidden connections among people and entities and establishes a risk value before a transaction is completed with more speed and efficiency than even the most experienced pair of human eyes.

Additionally, when combining AI and machine learning with graph technology, firms can start to realize automated case recommendations and decisions as well as track investigative outcomes against similar networks operating underneath the radar in a firm. All these advances in technology allow employees to turn their focus to the highest-risk areas.

3. Greater Industry Collaboration

Financial criminals do not work under a single structure, preferring instead to operate across clans, cells and networks. This means no financial institution can win the fight against financial crime on its own. The financial services community must band together to build strength and resilience in numbers.

While the legal and organizational mechanisms that will make information sharing easier are still under debate, regulators and investors are starting to recognize the wisdom and importance of cultivating a culture of collaboration among financial institutions. This cultural shift, combined with the adoption of new technology that makes it easier to work across multiple teams and share information, means financial institutions will be more likely to unite and fight against the common enemy now and in the future.

As the war on financial crime continues and grows ever more complicated in today's interconnected world, banks should look at how they can work smarter in the year ahead. With the right tools, processes and collaborative mindset, financial institutions can put a up a fight against criminals.

Jason Somrak is a Certified Anti-Money Laundering Specialist (CAMS) and chief of AML Product & Strategy, Oracle Financial Services.


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