United Nations (UN) survey found that annual money laundering globally is 2 to 3% of the global GDP, i.e. $800 million to $ 2 trillion. This remarkable loss of global revenue to money laundering crime has been the initiative of the global AML regimes. For instance, the money laundering, terrorist financing and transfer of funds (information on the payer) regulations 2017 (Money Laundering Regulations – MLR 2017) have been implemented in the UK in 2019. The rigid regulatory compliance requirements and the scrutiny of the liable institutions have made it necessary for the organizations to exercise vigilant Anti Money Laundering compliance.
Organizations around the globe are moving towards integrating Artificial Intelligence based solutions into their compliance programs. Automated AML compliance helps businesses to practice effective AML compliance solutions for enhanced customer experience and company value.
How AI-based AML compliance works?
Before investing in any AML compliance solution the executives of the company ponder over the pros and cons of the investment. The same is the case regarding the investment in outsourced AML compliance solutions. Hence it is necessary to make sure that the AML compliance will actually reap benefits for the organization in the future. So, it is necessary to dig deep into the process that AI-based AML compliance solutions run on the clients of a business.
Take Shufti Pro, for instance, it is a global KYC and AML compliance service provider which delivers real-time identity proofing services in more than 200 territories. Its AML compliance solution works in a very frictionless way.
First of all the AML solution is integrated with the existing system of the business. Later whenever a client tries to penetrate into the system of business he/she will have to show an identity proof with his real-time image. The identity document is screened in real-time with advanced OCR (Optical character recognition) technology. Other than that liveness detection screens for minute facial movements and ensures the remote presence of the user. The data collected from the identity document is used for AML screening with global sanctions lists, terrorist lists, and PEPs (Politically Exposed Person) lists.
Once the ID proof has been screened, the client is allowed to onboard if he/ she is not labeled as a money launderer or a high-risk person. In case the identity proof is fake or the person is found to be in a criminal list he/she will not be allowed to enter the website. Hence the risk is eliminated at the very first stage.
How the AML compliance solution brings in company value?
Revenue generation:
Once the fraud has been prevented using the AML compliance and identity verification solutions, the business actually sets foot on a progressive path. The businesses globally spend millions on fraud recovery. These recovery costs are a burden on the cash flow of the business. An extra expense is added on the income statement, reducing the revenue and shareholders’ wealth. The ultimate goal of every business is revenue generation. But the loss due to economic frauds like money laundering proves to be the killing blow for the budget of any business.
Once the AML compliance solution has been integrated into the system the businesses can easily eliminate the risk of money laundering through their channel or to serve money launderers. Hence the extra expenses of the company begin to reduce and the costs convert to revenue. AML compliance brings in company value because the consumers are more confident towards the businesses that have a vigilant identity proofing system, also the more a business is compliant with regional laws the more it is trusted by consumers and other businesses.
Fraud prevention:
People with fake identities have been commonly used for the purpose of committing financial frauds with businesses. It is a common practice that white-collar criminals use fake identity to transfer funds for money laundering or they use shell companies to manipulate their illegal money into business proceeds. Due to these cases, the Money Laundering Regulations (MLR 2017) of the UK were changed and the organizations are required to run due diligence on the Ultimate Beneficial Owners (UBO) of the companies they build relations with.
Hence running an identity verification on the clients and the merchants eliminate the fraud and keep the money launderers at bay.
Enhanced productivity of compliance department:
Using an automated anti-money laundering solution improves the productivity of the compliance department. Using an outsourced compliance solution is more cost-effective and time-effective. Many businesses have been using manual solutions for AML compliance, but it takes a lot of time, effort and money. For example JP Morgan a US-based bank hired 5000 employees for its KYC and AML compliance solution. This manual compliance program caused a cost of millions of dollars.
On the other hand, automated AML compliance is more cost-effective it has many advantages like,
- Effective data management
- Timely and effective decision making
- Frictionless customer onboarding
- Cost-effectiveness
- Global coverage with an accuracy rate of 99.6%
Hence an automated compliance solution is the ultimate solution for many organizations planning to invest in compliance solutions. Globally the organizations are required to perform AML screening on the clients and also to maintain complete compliance backup along with an effective compliance department.
Competitive advantage:
It is tested and proven that the more a company is compliant with compliance regimes of KYC and AML, the more competitive edge the company has over its competitors. Also, AML compliance is important because it gives an opportunity for the business to onboard more customers by providing them a secure environment. Because consumers feel more comfortable with the businesses that run vigilant security measures and provide seamless customer onboarding. Automated AML compliance brings in customer value and competitive advantage.
To conclude, AML compliance is the necessity of every business that wants to survive longer in the industry and prevent any penalties in case of non-compliance. All types of businesses and especially those involved in some type of financial services are under the strict scrutiny of the regulatory authorities, so investment in AML compliance is necessary for all of them. Hence if the compliance is necessary and inevitable, it should be done in a smart, cost-effective and future centric way. So that the investment would become an asset of the company and bring in company value in the future.