Despite AML enforcement and regulatory gaps, financial institutions in the region can now tap a cosmic opportunity to unite against fraudsters

Here is where three technological pathways can help financial institutions to cope:

  • GenAI solutions: While still in early stages, GenAI is being used in some banks to enhance risk management insights and scores. GenAI is also being utilized in core transaction monitoring and risk decision-making processes.
  • Explainable AI (XAI): This paradigm is increasingly important to anti-money-laundering (AML) diligence to provide transparency and enable financial institutions and regulators to understand how AI algorithms arrive at their decisions. This transparency builds trust, ensures compliance with regulations, and facilitates communication between stakeholders such as customers and partners.
  • Behavioral biometrics: Today, most AML teams rely solely on transactional data to identify money-laundering attempts. Some banks already use behavioral biometrics as additional layers to detect mule accounts before an actual money transfer occurs. These technologies use sophisticated facial and voice recognition and even physical gait analysis to identify people involved in suspicious activities more accurately.

APAC countries can take a leaf from the COSMIC platform playbook. The framework has the following key data security/privacy management characteristics:

  • Information sharing will be justified if customer behavior or transactions raise red flags that cross stipulated thresholds. In this case, all financial institutions party to the AML data sharing collaboration can provide information securely, with links to the customer or transaction.
  • Parties to the scheme must also file a “suspicious transaction report” to their AML authorities and alert others in the industry via a platform watchlist.
  • The thresholds details and permutations of the red flags must be kept strictly confidential among only the participants — in order to prevent criminals from circumventing them. These conditions will also ensure that information-sharing is “strictly restricted to cases of high financial crime concerns”, to ensure the interest and privacy of legitimate customers. Otherwise, for most customer activities, no red flag indicators will be triggered, and details of such customers or transactions are not shareable.
  • Under this collaboration platform, financial institutions will receive statutory protection from civil liability, provided that any disclosures are done in accordance with the specified thresholds, and made in good faith with reasonable care.