Every country in the world is affected by financial crime. These criminal acts stretch well beyond the money that’s stolen for personal or professional gain. Its reach touches the global economy, national security, and society at large.
According to the IMF and World Bank, criminals launder an estimated two to nearly four trillion dollars each year. And, recently, Interpol released its first-ever Global Crime Trend report which listed money laundering as the number one crime threat.
Follow the Money, The Devastating Impact of Financial Crime
Terrorism: Money is a means to an end to terrorism. Money laundering and terrorism financing activity in one country can have serious global adverse effects. Countries with weak or ineffective controls are especially attractive for money launderers and financiers of terrorism.
Human trafficking: Money laundering linked to human trafficking is one of the most significant illicit finance threats facing the United States. It yields an estimated $32 billion in illicit profits each year and claims 600,000-800,000 victims each year.
Drug trafficking: Drug profits moving through the U.S. financial system are estimated to be as high as $100 billion a year. The trade in illicit drugs is estimated to be worth $400 billion a year, and it accounts for 8% of all international trade, according to the United Nations.
Environmental crime: According to Interpol, environmental crimes, including illegal exploitation and theft of oil, provide an estimated 38% of illicit income to armed groups, more than any other illicit activity, including drug trafficking. This ultimately leads to pollution and climate change.
War: The United States has expanded the use of sanctions, applying them and ramping them up against adversaries in Iran, Russia, Syria, and Venezuela. The Russian- Ukraine war has created a whole new array of sanctions against Russian oligarchs who have hidden money in shell companies and are trying to move their money undetected. There are currently 8,382 individuals and 1,565 entities from Russia targeted by sanctions.
The Case for Automating FinCrime Compliance
The primary challenges for financial institutions when it comes to FinCrime mitigation and AML/Sanctions/KYC compliance include navigating highly manual tasks such as alert reviews, compliance operations staffing, cost, and human error.
A recent LexisNexis report found 85% of firms across the U.S. and Canada cited ‘Growth in Volume of AML Activity’ as a top external compliance cost driver. Nearly every firm, even those that did not call out anti-money laundering activity as a top cost driver, is having to deal with increased costs of regulatory compliance. The annual cost of compliance is estimated to be approximately $200 billion and rising at 20% per year. Additionally, a staggering 87% of all firms surveyed said that more compliance regulations have increased workload volumes over the past 12 months.
Bringing in bad actors is also bad business for banks. It goes well beyond simply stopping the bad actors from opening accounts, there are second-order effects on the bank in the process: mitigating risk, bank employees get burned out, customers’ accounts get frozen, and operating expenses soar. Not to mention the potential financial penalties for non-compliance. Since 2008, there has been $27 billion levied in fines against financial institutions for AML/KYC sanctions violations.
WorkFusion’s VP, Global Head of CLM, Daniel Hazel, explained, “It’s like a snake eating its own tail. Your existing team gets overburdened. They can’t deal with the volume. Then volumes go up. They can’t deal with the new volume. People get burned out, they leave, and there’s a brain drain. The remaining team is now even more overburdened. But volumes are still going up. Things naturally get missed.”
Many government agencies, regulators, and financial crime watchdogs are all pushing the financial sector towards innovative industry approaches to solve some of these FinCrime and AML compliance problems. They want technology and machine learning (ML) to liberate and improve human intervention and judgment. And, regulators are increasingly warming up to leveraging technology to reduce compliance risks, capacity savings and costs.
Fortunately, artificial Intelligence (AI) and ML are being used to solve these real-world financial crime problems. According to Jo Ann Barefoot, CEO and co-founder of Alliance for Innovative Regulation, “Today, there is so much data that not only can we use AI, but in many fields like financial regulation we have to use AI simply to keep up.”
Purpose-Built to Fight Financial Crime
Over the past several years, the banking and financial services industries have faced an unprecedented talent crisis — driven by the pandemic, the Great Resignation, an aging workforce, the Russian-Ukraine War, and now economic cooling. Regardless of the macroeconomic events slamming the labor markets, work still needs to get done.
At WorkFusion, our purpose is to help banks and financial institutions fight financial crime and reduce risk by augmenting existing operations teams in key compliance functions like anti-money laundering (AML), sanctions, customer onboarding, and Know Your Customer (KYC) with our AI Digital Workers.
Digital Workers are a fully trained AI digital workforce specifically designed to fight financial crime. The technology combines robotic Process Automation (RPA) capabilities plus machine learning (including NLP), Intelligent Document Processing (IDP), pre-built connectors, Optical Character Recognition (OCR), etc. that work together to automate end-to-end operational processes for learning and adapting to data in real time.
Financial institutions devote thousands of employees and billions of dollars to AML + Know Your Customer (KYC) compliance. In fact, it is not uncommon that alert review teams (sanctions and anti–money laundering combined) make up 56% of a bank’s compliance staff.
Using time and money to review thousands of false positives is an efficiency problem that can lead to missing the bad actor “needle in the haystack,” that rare true positive, due to resource strain from reviewing thousands of false positives.
However, AI Digital Workers allow banking and FI compliance operations teams to go on with business as usual regardless of the macro circumstances. AI Digital Workers are available to work 24/7. They don’t need PTO, get tired or burned out and don’t have bad days.
For example, Evelyn is an AI Digital Worker designed for sanctions screenings alert review and adverse media monitoring for politically exposed persons (PEP). “She” has unprecedented insight for quickly gathering high-quality data, conducting searches, navigating internal systems, and utilizing commercial systems.
Evelyn delivers accurate, quality data with timely reports by combing through disparate networks. Her machine-learning capabilities give her the power to learn and expand on her knowledge base. The more she knows, the more she minimizes sanction breaches and reputational risk. “She” also ensures thorough end-to-end audit trails to centralize supporting evidence and approval processes for compliance.
Customers using Evelyn have seen 80+% reduction in false positives for sanctions alerts and reduction in manual review time for adverse media alerts. “She” also reviews millions of alerts per year.
Evelyn is one of five WorkFusion AI Digital Workers designed to work alongside human colleagues within financial organizations to prevent bad actors from accessing funds and committing financial crime.
The methods and tactics banks and FIs use need to evolve to keep up with the advancement of financial crime. The Russia-Ukraine War and the use of increased sanctions as a war deterrent has further illustrated the need for automated financial crime prevention solutions. However, many organizations are still using outdated technologies and inefficient manual processes that result in inaccurate results. WorkFusion AI Digital Workers are a first line of defense to help overcome these issues and stop financial crime by augmenting AML/BSA compliance operations teams and completing tasks that involve reviewing false positives (screening, fraud, monitoring, etc.) and other due diligence work, including reporting, collating information, and identifying red flags.
To learn more, request a demo.