3 Must-Have RegTech Upgrades for AML Teams in COVID World

May 18, 2020

RegTech (regulatory technology) can augment the fight against COVID-19, especially at a time when a CaseWare RCM survey found 96 per cent of us are working remotely and 82 per cent of AML compliance teams are using web-based compliance systems.

With its advanced use of artificial intelligence (AI), RegTech, can significantly assist financial institutions and other firms by analyzing and correlating large amounts of data. It also has ability to proactively alert on possible abuses and the ability to quickly adopt new polices and rules.

Khaled Ghadban, director of analytics at CaseWare RCM, says compliance departments will have to start to incorporate more tech than they currently do. Ghadban was recently interviewed on the subject by the Financial Times Group.

“Compliance has become critical to an organization’s day-to-day business operations, but still lags behind in pivoting from manual to automated and dynamic process. Compliance departments need to have a full digital transformation strategy – a rethink of platform, people and process – in place to rapidly respond to regulatory changes,” he says.

Handling data in times of crisis

Given the effects of the coronavirus, remote access and web-based technologies will drive how compliance teams will access data and systems. Innovative new tools and offerings will help to fill in gaps created by the inability to meet with customers face-to-face. Here are some of the changes going forward:

1. Access to enterprise systems: While many organizations have moved to web-based systems, there are still many that rely on some amount of on-premise systems.

This means that they may not be able to access the information they need and have to delay decisions and reporting until they are in the office. Many organizations are going to continue making the move towards web-based systems for legacy systems.

You will also see a greater uptake on cloud technology since it does provide that ubiquitous access to systems and data. Cloud infrastructure also provides greater data storage and backup capacity without the need to invest in expensive IT infrastructure.

2. High-tech identity verification: Without the ability to have a face-to-face meeting in a branch office, companies are going to have to rely on other means to verify the identity of new customers.

Technologies like electronic document/identity verification are part of that equation. You will also see a greater reliance on enhanced due diligence (EDD) reports to not only verify individuals but also to track the history of a business, verify directors and determine the ultimate beneficial owners (UBO) of organizations.

3. Technology for greater emphasis on fraud detection:  Many organizations already have a fraud prevention program in place but with more federal money being distributed in coronavirus-related programs and new and untested trade relationships being forged, companies are going to have to place greater resources on fraud and trade-based money laundering (TBML) prevention programs.

Again, technology-supported EDD reports will also be a key tool for fraud and money laundering prevention, in advance of any new supply chain agreements, in order to ensure that organizations are doing business with reputable companies (before the fraud occurs).

AI plays a larger role

AI is not going to be just for the large players. Smaller companies can now take advantage of this technology by leveraging fraud models that have already been developed and leveraging the cloud for the computing power needed to process the large number of transactions needed to detect unusual activities.

Ghadban says the greatest vulnerabilities in this new environment is that COVID-19 has forced financial institutions to pivot in the way they currently operate.

FIUs still expect full compliance

Regulators have been clear about their expectations from financial institutions during these challenging times.

There are also new risks with the financial programs introduced in response to COVID around the world. The speed and variability of these changes with the introduction of aid programs can introduce new risks. Financial institutions will have to dynamically assess emerging risk and technologies.

Demand for regulatory technology was rising before COVID affected the global marketplace. But as banks, FIs and other corporations are now seeing, the effort required to maintain compliance as well as detect, investigate and report suspicious activities can decrease significantly with investment in RegTech.

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