Banks, financial institutions, and other organizations face countless challenges every day to keep their business secure from fraud. Keeping track of all the anti-money laundering regulations and making use of the latest and efficient technology to tackle the money laundering problem can be tough. This is basically an endless battle against fraudsters who try to acquire funds using illicit methods and banks need to learn how to combat money laundering.
All that a fraudster needs is one bank system to stop paying attention and they gain a new portal to launder money. A single banking institution’s mistake can have a huge impact on the global economy, in a particular industry or the money could be used to fund terrorist activities. All major regulatory bodies like the FinCEN, need to keep updating their regulations to be able to fight the money laundering situation from growing and so that banks and other financial entities can service ways to combat money laundering.
There are several things that banks and other FinTechs can do to tackle money laundering. Following the ways to combat money laundering to the last point can reduce the chances of online fraud by tenfold.
The growth in technology can be utilized for providing fake information such as bank statements, wrong proof of address to trick banks. It is becoming increasingly difficult for organizations to filter between potential threats and false positives.
If a bank or any other financial institution wants to protect their current customers, they need to look at their past mistakes and set up countermeasures for future mistakes. If institutions can reduce the count of false positives, they can expand their scope of fighting money laundering and other kinds of online fraud.
Using machine learning and AI-based technologies to conduct searches at regular intervals can reduce the burden on AML officials. AI and Machine Learning technologies can help in finding out some false positives while searching through the database. You can even strengthen your process by AI searching on a broader scale and your manual team focused on one specific location. This combination of technology and manpower is one of the answers on how to combat money laundering with the use of technology.
Multiple organizations have a quarterly or half-yearly round table meeting with state and local law enforcement and other banks in the area to discuss all the latest trends and how to fight money laundering problem. The primary goal of these meet-ups is to stay up to date on all the methods of fighting fraud that can risk the security of customer data in any way.
By staying connected to each other, law enforcement can inform banks about the latest schemes opted by fraudsters to trick organizations. While a lot of banks have systems in place that allow them to stay on top of all the new schemes used by fraudsters, this alliance can be really helpful in curbing money laundering activities.
By having constant meetings, banks and law enforcement can keep each other on top of all the new trends/schemes. Verify any suspicious activities and enhance the business-law relationship. All this is one strong step in keeping customer’s information safe and making sure no one acquires money using illegal methods. While this isn’t the answer to how technology can stop money laundering, it is still an effective method of making sure the fraudsters don’t operate freely.
Making use of data analytics is one of the best methods of fighting money laundering practices. Data analytics helps banks and financial organizations understand the pattern in recurring money laundering or online fraud activities. There can be a pattern like a specific geographical location origin, specific product/service type, and a specific job occupation type.
Once the AML officials recognize such patterns, they can develop countermeasures or special strategies that can reduce potential risks. The objective of using data analytics is to analyze a customer in “real-time” and reduce the risk for banks before anything happens. Money launderers need less than a week to place the money in the bank and after that, the money is gone, so is the person who deposited it.
Data analytics deem people with multiple PINs or people with connections to tax frauds as potential threats. Knowing this information during the customer onboarding process can help banks prepare for fraud and learn how to deal with money laundering problems.
Like any other industry, banks also grow themselves by acquiring their rivals. Constant acquisitions lead to a wide network of different computer systems, different bookkeeping types, and other differences.
Some divisions may use spreadsheets, some may use ledgers, and this difference in the system can benefit those who are looking for a weakness in the system for fraudulent activities. That’s not all, this can also lead to information breach, customer information loss, and loss in working efficiency.
This is one of the reasons why all industries are moving towards a complete digital working environment. The growth of the cloud industry can support huge organizations running on digital technology, this also improves the privacy of data.
Almost every bank or financial institution has a team of AML officials that ensures finding and getting rid of any suspicious activity. To be able to do that, AML officials need to know what to look out for. That’s why proper training is needed to detect fraud and report it to the right authorities.
Training the staff that’s your first countermeasure against money laundering is crucial. Let’s say some cyber attacker is using an account of a deceased person to launder money, if your staff doesn’t know what anomalies to look out for, this activity would go unnoticed. Training the front-end staff on what they need to notice is one of the best methods to fight money laundering problem and comply with AML regulations.
DIRO’s Assistance to Banks for Fulfilling AML Regulations
DIRO’s award-winning document verification technology aims to weed out fake or fabricated documents. Banks, financial institutions, and FinTechs can use DIRO’s instant document verification technology to verify documents submitted during the KYC and AML Compliance process.
The technology instantly verifies the document against the original document on any third-party web source. It even provides strong proof of authentic documents that can be used as original documents. DIRO places the document on the blockchain which makes sure the information is provable and unable to temper with. Using the technology, banks can improve the overall customer onboarding process by reducing friction and also reducing the risk for money laundering and other types of online frauds. The utilization of DIRO’s document verification technology is one example of how technology can stop money laundering.