What Does Artificial Intelligence Mean for AML and KYC Compliance?



Elucidating the ways AI can transform AML and KYC Compliance

In the financial sector, anti-money laundering (AML) and Know Your Customer (KYC) are the two major regulatory and legal requirements for banks. AML typically refers to the procedures, laws or regulations designed to curb the practice of income generation through illegal actions. Conversely, KYC is the process of identifying and validating the identity of customers. AML is a broader and more holistic practice than KYC, while KYC is a critical part of AML for corporations, banks, fintech, and other financial institutions.

Today, many financial services providers are struggling to comply with regulations to identify and verify clients. Additionally, for this process, they rely on manual processes that adversely affect timelines running into several weeks. In this process, increased costs and errors are inevitable. Hence, when applying AI to KYC and AML processes, banks can experience a decrease in the duration of control processes, reduction in human errors and costs.

As AI is capable of automating workflows and quickly analyzing large volumes and distinct data types, it takes KYC and AML compliance to the next level.

Here’s a look at how AI can transform AML and KYC compliance processes.


Enhanced Due Diligence

AI-powered KYC solutions can perform document verification in just a matter of seconds to validate the address and true identities of individuals. Using AI can automate the creation and upgradation of the client risk profile and match this against the classification process to ensure continued compliance throughout the client life cycle. Furthermore, it can make the process of identifying high-risk clients even easier for enhanced due diligence processes. Enhanced due diligence is a KYC process designed to handle high risk and large transactions.


Ultimate Beneficial Ownership

AI can identify various transactions that lead to Ultimate Beneficial Ownership, the person who ultimately owns a legal entity or legal person during a transaction. The technology has the capability to excerpt actionable information from vast data sources through data processing. AI delivers a huge benefit to compliance teams who are tasked with weaving through complex webs of data on shareholders, beneficial owners, directors and associates and will improve their ability to draw accurate conclusions for a risk-based approach to compliance.


Managing Regulatory Compliance

AI has the potential to read and comprehend significant details from the text. NLP, which is a crucial subset of AI, can support businesses to stay updated with the KYC compliances and thwart malicious actors as the regulatory environment is always changing at a high pace. By using AI solutions, businesses can prevent the risks of money laundering, terror financing, and minimize human error, and remain in compliance with regulations.

In recent years, organizations across the world have increased their focus on regulations to enforce anti-money laundering laws. According to the United Nations Office on Drugs and Crime (UNODOC), between 2-5 percent of global GDP, as much as US$2 trillion, may be laundered every year.