Whilst the prominence of AI has been rising steadily and strong over the last few years, it hasn’t been until 2023 that its position in operational practices has skyrocketed.
Marius-Cristian Frunza – Director at Schwarzthal Tech – recently detailed how firms can use artificial intelligence to enhance KYC offerings in a presentation.
As highlighted by Frunza, AI refers to systems and methods that aim to simulate or replicate human intelligence.
He said, “In the world of compliance, AI can be used at three levels. The first level is automation. This is a kind of simple task where the AI replaces repetitive manual tasks. The second level of complexity is the emulation of human logic reasoning, for example, rules-based actions. Last but not least, the most sophisticated origination of new rules and new reasonings if enough data is available, machine learning techniques can generate new rules based on the data discovery process. This is a third level of complexity of AI.”
How can AI help KYC? Frunza emphasised the ability of automation for simple name matching, such as the names and data of birth that are available across two different databases. Frunza stated that AI can contribute to making this a more sophisticated approach in the client discovery process.
Frunza went on, “Matching names in different languages, exploring a diverse media or exploring media in general can be a very useful source of information. And here, techniques that are being done include named entity recognition extracts names.
“Last but not least is the creation of new rules of matching identities based on exploring underlying extended networks. For example, companies with similar names, addresses or other other features. looking for patterns for example, when assessing the transactions of a client with various counterparties these patterns can look similar and this can be used for matching identities.”
The ever-growing power of artificial intelligence is providing the opportunity to financial institutions to use the technology to make their practices more powerful and efficent in the long term.
As firms globally look towards the future, what is going to be the role of artificial intelligence in risk management and financial crime? There is a growing industry belief that AI – and machine learning – are benefitting KYC processes.
Recent comments by Sila Money stated, “AI and machine learning are enhancing KYC processes through ongoing monitoring and re-KYC. By automating parts of these critical compliance functions, AI allows financial institutions to improve security, reduce risk, increase efficiency, and improve the customer experience. With AI as a partner, compliance teams can achieve a new level of effectiveness and scalability.”
To listen to the whole presentation, enrol in the Professional RegTech Certificate.
About the Professional RegTech Certificate
The Professional RegTech Certificate course offers a comprehensive and practical exploration of Regulatory Technology (RegTech) for professionals working in the financial industry. With a focus on real-world applications, the course covers key topics such as the fundamentals of RegTech, adoption strategies for financial institutions, the regulators’ perspectives, data reporting, KYC and onboarding, anti-money laundering, cybersecurity, advanced technologies such as AI and ML, and specific legislations.
The course stands out from others by providing a holistic view of the RegTech landscape, combining real-world case studies with insights from leading-edge RegTech innovators and senior leaders from financial institutions.
You can enrol here.
