Challenges

Know Your Customer (KYC) is a key part of money laundering and anti-terrorism legislation. The Customer Due Diligence (CDD) process requires banks to file reports of suspicious activity. Almost two million such reports were filed in the United States alone in 2017 according to a study by the Royal United Services Institute for Defence and Security Studies — a U.K. think tank. Failure to identify and file reports on suspicious transactions results in billions of dollars in fines for banks. Investigators looking into suspicious activity use a variety of tools including rules that flag frequent or international transactions or interactions with offshore financial centers. Unfortunately, with the volume and variety of transactions, rules-based approaches are not flexible enough to capture new patterns and produce large number of false positives that need to be reviewed.

Opportunity

AI is an ideal technology for finding anomalous patterns and identifying areas of risk especially where there are a large number of items of different types that need to be reviewed and potentially correlated. Machine learning can be used to perform analysis of transactions and can look for indicators of suspicious behavior including transactions with dubious jurisdictions, suspicious companies or known parties. AI can also offer better insights into transactions through analysis of both structured and unstructured data. Natural Language Processing (NLP) techniques allow AI systems to search through communications to find additional signal including extracting metadata, identifying people or companies referenced, and categorizing the intent or purpose of the communication. All of these can help pinpoint suspicious transactions and help investigators as they investigate transactions.