Financial institutions are in line to upgrade and revamp their operations. Criminals have other intentions and for execution, they are using digital methods. Criminals use fake credentials and forged documents to trick the identity and anti money laundering verification process. Banks and other financial firms lacking authentic verification operations are more likely to fall prey to criminals.
Therefore, financial institutions require authentic AML solutions to detect the risks customers possess and verify their identities in real-time. AI-powered services are such robust solutions as they enable financial institutions to adhere to AML compliance. Digitally advanced verification processes allow money-involved firms to access global databases. This way, they can detect criminal threats in time and restrict fraudulent entities from registering on the platforms. This blog covers the methods that AML solutions offer to money-involved firms.
How Do Digital Verification Solutions Provide Efficient AML Screening?
Money laundering refers to the use of illegitimate funds to either make investments or purchases. Criminals use financial institutions to convert their black money to white. However, accurate identity verification solutions in place will leave fewer loopholes. Financial firms adopting improved services are less likely to experience criminal threats. For instance, they won’t be able to identify the beneficiaries as well as the business owners.
Criminals put the whole of the economy at stake and cause reputational damage to the respective sectors when they succeed in converting their ill-gotten funds. This ultimately leads to hefty penalties. According to stats by LegalJobs, the financial sector hit a new record in facing penalties of over $10 billion. Therefore, financial institutions need to incorporate robust AML monitoring systems. For this, they need the below-mentioned key areas.
Perform Accurate Customer Due Diligence (CDD)
Regulatory authorities are revamping the regulations while imposing more strict ones on financial institutions. This is due to the rise in financial crimes. Among these standards fall a verification process – Customer Due Diligence (CDD). In this process, the banks ask for relevant information from the customers. After submission, they imply a risk-assessment approach to evaluate the customers. These checks validate the identities of customers and cross-verify them against various lists. For instance, sanction and Politically Exposed Person (PEPs) list.
CDD procedures vary as to the jurisdiction financial institutions are operating in but the prime aim is the same. The system detects the customers that have a high chance to commit money laundering or terrorist financing risk. Therefore, Shufti Pro Funding indicates that AI-powered AML screening is what financial institutions need.
Constantly Monitor Transactions and Activities of Customers
Banks work in alliance with other banks which is why the transaction, withdrawals, deposits, and transfers are not limited to just one of them. There are other firms involved. This somehow marks the verification tricky. If banks and financial institutions are using traditional methods, the chances of criminal threats will increase. However, these situations still do not allow banks to leave customer verification and continuous monitoring unattended.
Regulatory authorities like FATF, IMF, FinTRAC, FINRA, and FCA are enforcing strict regulations for financial institutions. According to the obligations, banks can not just stick to verification during registration, they also need to keep track of what their customers are doing. For instance, monitoring their transactions, identifying their source of funds, and the purpose they are using the money for. Here, the AI-enabled AML monitoring services are their reliable go-to solutions.
Ensure Adherence to Know Your Customer (KYC) and AML Set-standards
According to Shufti Pro News, financial institutions use KYC services to verify their customers. This is most commonly done at the stage of account opening and transfers. KYC is not just a requirement but also a regulatory obligation. KYC is a crucial stage in the AML compliance process. Financial institutions should verify and cross-match customer identities, detect their liveness, and validate documents.
For the process, the system asks for required information like full name, social security number, date of birth, and proof of address. This information is later accessed and the system cross-verifies it within the global databases. By using AML systems financial institutions can place gates in their way by using technologies like biometrics and OCR.
Report Suspicious and Criminal Activities in Time to Authorities
If the financial institutions have onboarded legit customers but they start doing suspicious activities, the firms should report them directly to the authorities. At times, criminals use legitimate owners as the front face and commit their illicit goals of financial crimes. Therefore, financial firms need accurate AML solutions so that they can keep track of customers’ activities on the go.
Concluding Remarks
Financial institutions are on the verge of bringing invocation to the operations and so are the criminals. Therefore, banks and other money-involved firms need to employ anti-money laundering solutions to combat criminal threats. Moreover, these will help financial firms seamlessly ensure AML compliance and retain a reliable reputation.
