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16 February 2021, 8:30


How to tackle Regulation with Innovation

Tackling Regulation with Innovation

Since 2008, the global AML penalties have reached $36 billion . The scale of financial crime also continues to grow, while the methods used by criminals to launder the proceeds of crime evolve. Never has it been more important to embrace new technologies that automate AML compliance process.

Financial institutions are constantly faced with changing regulations across multiple jurisdictions. The Financial Action Task Force (FATF), an inter-governmental body with 37 members the world over, has framed a set of regulations that is recognized as an international framework for AML standards. Many of the financial institutions have been penalised due to a lack of appropriate systems and compliance infrastructures that are necessary to identify and address areas of high risk across different jurisdictions.

Institution Structure

Banks face several challenges in managing risks involved in assessing the current AML status and identifying
vulnerabilities leading to high penalties from regulators.

Banks, Fintech’s and Asset management firms are traditionally more manual in nature which hampers financial institutions’ abilities to expedite compliance. Financial institutions of any size, and within any sector, must embrace technology to its fullest.


Technological advancements – artificial intelligence (AI), analytics, and machine learning (ML) can be applied to enhance AML automation.

  1. Fraud detection: Advanced filtering technologies and analytics for real-time fraud detection and generation of
    alerts based on changes in behavior patterns to detect suspicious activities and track money trails.
  2. Screening: Identify politically exposed persons (PEP), and obtain default information for account reviews of
  3. Linkage Detection: To identify customers having multiple accounts under different names, to track transactions happening through common cyber infrastructure and finally, to track transactions linked to a closed group of entities and performed with a clear intention of routing money to destination accounts.


The future in Fintech is Sustainable

In a recent article with Magnitt our CEO, Simon Dix, talks about how Fintech’s can gain sustainable growth with an advanced AML system.

The world of Fintech is ripe for growth in today’s complex digital world, yet one of the concerns of growth for investors, clients, and staff, however, is how it can be sustainable and long-lasting.

What are most Fintech’s doing?

  1. Checking lists of sanctioned persons/entities.
  2.  PEP (politically exposed person) screening.
  3. Monitoring transactions against basic thresholds.

What most fintech are forgetting to do?

  1. Automating SARs (suspicious activity reports) and AML compliance reporting.
  2. Using machine learning to detect suspicious behaviour in transactions (basic rules and thresholds are not enough to keep up with criminal activity).
  3. Creating risk-based scenarios to detect suspicious behaviour in transactions (which is needed to not get charged multi-million-dollar fines).
  4.  Automating Transaction monitoring and replacing manual reviews to save money, add scalability, and reduce human error.


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