The landscape of regulatory compliance has always been complicated, but recent research revealed that the vast majority (92.4%) of compliance professionals feel like their jobs have gotten even harder. Between ongoing regulatory concerns and stretched-thin resources, it’s no surprise that compliance teams are feeling the heat, especially when you consider that 77% of them are still relying on manual processes that can create risk and inefficiencies.
This issue is further amplified by the fact that many criminals have upgraded their schemes and have begun using sophisticated AI tools to bypass detection systems. Fraudsters cause companies to lose around 5% of their annual revenue, and that number will likely only go up if financial institutions’ compliance teams delay using AI.
AI-powered compliance tools could help prevent billions in annual fraud losses, but regulatory caution has created a dangerous paradox where financial institutions avoid the very technology that criminals are already using to outmaneuver traditional threat identification systems. Investing in AI-driven tools can give organizations a strategic advantage, reduce risk and help them avoid additional regulatory scrutiny.
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Start using AI now
With estimates of money laundering comprising up to 5% of global GDP, it is an issue in the financial fraud landscape that demands attention. To help stop this crime, financial institutions should lean into innovative technology for anti-money laundering (AML) and Know Your Customer (KYC) processes. Rather than waiting for an enforcement order to spur an update to outdated, more manual processes, integrating AI into AML/KYC compliance programs can help improve the efficacy of crime prevention tactics.
The introduction of AI can help financial institutions accelerate their crimefighting capabilities and potentially even outpace the innovation leveraged by bad actors. However, benefiting from this type of tech does require a bit of bravery to embrace changes to traditional methods of fraud prevention and detection.
When looking to deploy an AI solution, some common roadblocks often hinder progress, including:
- A lack of understanding about AI technologies and what they can really do.
- Hesitation and concerns about “rocking the boat” from risk-averse compliance officers.
- Reluctance to admit that current systems need an upgrade.
- Fear that implementing new systems might signal that current processes have problems.
- Organizational inertia and budget constraints.
However, these pale in comparison to the potential pitfalls of ignoring AI tools when financial crimes are already being perpetrated using them. In this case, fighting fire (the bad guys’ AI tools) with fire (your good guys’ AI tools) is much more likely to be successful than continuing to pursue legacy fraud-prevention processes. It’s time to muster up the courage to do something different and start implementing AI-powered AML strategies.
The path forward
A culture shift for this cautious, risk-averse sector could help better combat criminals already using increasingly intelligent technologies. Here are some ways to responsibly move AI innovation forward:
- Understand that regulators encourage responsible innovation.
- Educate teams on AI’s actual capabilities beyond just the marketing hype.
- Create digital sandboxes and put together innovation teams to test AI solutions.
- Make sure teams are cross-functional by including compliance, tech, operational and data professionals.
- Keep humans in the loop at all stages to help ensure appropriate oversight of AI systems.
AI can give help deliver exceptional outcomes in efficiency, effectiveness and employee satisfaction while maintaining strong customer experience and privacy protection. Embracing the challenge of exploring responsible AI and innovation approaches can result in leveling up compliance strategies and potentially curtailing instances of fraud. Starting earlier would have been ideal, but it’s not too late now — don’t let the pursuit of “perfect” timing prevent you from taking action.
You don’t have to be an AI expert to start using these tools! Keep in mind that while initial attempts may not yield perfect results, consistent efforts can generate gradual enhancements and spark new innovative solutions as you continue to experiment. The most successful compliance teams embrace all available technologies to help combat fraud and drive innovation. Don’t throw regulatory caution to the wind; take the time to responsibly deploy AI solutions to protect your firm.
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