The financial services sector has always been slow, if not reluctant, to adopt new technologies. Innovative technologies have been introduced over the years for the financial sector but their major concern remains the safety of their client data. Anti money laundering or AML compliance has been one of such processes. RegTech or regulatory tech has been a relatively new but a key player in this arena. Third-party vendors have been able to develop software that can streamline the compliance processes.
RegTech has been making waves in coming up with solutions that can help in the implementation of regulatory procedures in a productive, efficient and cost-effective manner. They primarily use disruptive technologies like Artificial Intelligence and Machine Learning to develop such solutions. Some of the many ways that RegTech can help improve the compliance process are;
Production of Precise Risk Profiles
The ability of AI to process huge amounts of data and to extract actionable facts from it in practically no time at all is its greatest strength. Raw and unstructured data collected from customer transactions is processed within minutes by the AI. It is able to then extract actionable intelligence from that data. The risk reports generated by the AI then enables banks and financial institutes to develop authentic risk evaluations and take the necessary actions to eliminate those risks. This can enable them to implement compliance regulations within ample time and save millions of dollars in fines. Such reports can also improve the customer due diligence process for high-risk clients.
Automated AML Screenings
For several years AML processes and Know Your Customer (KYC) verifications have been done manually. Therefore, naturally, they have been slow and have a higher possibility of error. They also tend to generate a greater number of false alerts. Integrating the AML screening process with AI can lead to a faster compliance process and can generate accurate results with fewer errors. It can screen through global watchlists to perform AML checks and can then alert the bank’s system of a client’s vulnerable status.
Enhanced Onboarding Process
The improved AML compliance processes can smooth the client onboarding procedures and can enable a company to take on clients without much delay. Manual AML procedures took days to process documents and assess the authenticity of a potential customer. Advanced RegTech can improve such procedures by sifting through large amounts of data sources and making sure that the person is not exposed financially or politically. It can also help verify the documents of the customer making sure that s/he is using legitimate details for account opening.
Assessing the Shifts in Regulatory Changes
The revolutionary RegTech can also be used to detect changes in compliance procedures and regulations. Automated monitoring systems can be implemented to keep a track of changes in anti money laundering laws rules and regulations. This can enable banks to keep a track of new regulations and requirements and implement them in a timely manner. It can also fill the existing gaps in the system to achieve accurate risk analysis.