• Mon. Apr 22nd, 2024

AI Has Potential To Help Fight Money Laundering Networks

AI Has Potential To Help Fight Money Laundering Networks

Money laundering is a highly pervasive global issue that poses major challenges to financial institutions, governments, and regulators globally. Many criminal organizations have come up with ways to exploit sophisticated techniques to launder illegal funds. Thus, it has now become increasingly difficult to detect and thwart these illicit operations.

Nevertheless, amidst this ever-evolving space, the growing potential of artificial intelligence (AI) has become a powerful tool that can help in fighting against money laundering networks.

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Artificial Intelligence can process huge amounts of data, identify complex patterns, and make intelligent forecasts. It holds the key to changing the way financial crimes are discovered and investigated. By leveraging innovative machine learning algorithms, AI platforms can excellently sift through huge volumes of transactions, flagging any suspicious activities and transactions that may otherwise go unnoticed.

This heightened capability saves valuable time, and resources, and significantly strengthens general anti-money laundering (AML) efforts. Major firms and organizations are turning to this solution to help minimize cases of money laundering by criminal gangs.

Google Cloud Introduced AI-Powered Anti-Money Laundering Tool

Advancements within the artificial intelligence space have now ushered in a new era of possibilities, increasing the potential for transformative technology to become applicable in different domains. Recently, breakthroughs in the AI research and development sectors have opened doors to innovative applications. These innovative advancements have helped revolutionize sectors such as transportation, healthcare, and finance.

On June 21, Google Cloud confirmed that it is launching an AI-powered tool designed to enable banks and their users to combat money laundering.

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Google Cloud launches AI-powered anti-money laundering tool

Interestingly, Alphabet’s (NASDAQ: GOOGL) cloud segment aims to offer banks an advanced AI product that will enable them to effectively calibrate networks meant to identify possibly risky transactions and user activities. Consequently, this will enable banks to boost their compliance with regulations that need them to detect and report all suspicious customer behavior.

The solution, known as ‘Anti Money Laundering AI,’ is already getting utilized by many prominent banks, such as Brazil-based Banco Bradesco, HABC, and Lunar, a digital bank that is based in Denmark.

Improvements That The Google Cloud Tool Brings

The introduction of Google Cloud’s new product comes in the wake of an AI frenzy. The unexpected success of OpenAI’s bot, ChatGPT, late in 2022 has left many tech firms rushing to develop and commercialize their AI solutions, and integrate them into their routine operations.

One of the industries that may significantly benefit from the current AI boom is finance. The sector has been dependent on traditional types of AI to help them go through billions of transactions daily.

Related: The Ultimate ChatGPT Guide for 2023

With their current tools, financial institutions and banks are needed to manually calibrate them to detect any suspicious activity. In many cases, improper calibration results in inaccurate inflation of the number of these behaviors, which mostly results in the generation of poor-quality leads.

On the contrary, Google’s Anti Money Laundering AI prohibits users from manually inputting rules. Instead, it enables them to customize the tool using their risk indicators and typologies, as highlighted in The Wall Street Journal (WSJ) report.

Using an AI-oriented strategy, the tool cut the number of alerts HSBC received by up to 60%. On the other hand, the total number of “true positives” increased by four times, according to Google.

BIS Considers AI To Combat Money Laundering Networks

With the emergence of artificial intelligence, the Bank for International Settlements (BIS) has been considering the possibility of using AI with other technologies and strategies to detect and shut down many money laundering networks more proactively.

Notably, the BIS Innovation Hub recently completed a study that has noted an enhanced performance of a behavioral-based analysis strategy that uses privacy-boosting technologies, artificial intelligence, and payment data, coupled with increased cooperation compared to the current rules-based method, according to a May 31 statement by the organization.

Particularly, the BIS Innovation Hub’s Nording Center and Icelandic AI software-as-a-service (SaaS) firm Lucinity have been investigating new methods of addressing huge international money laundering schemes that mostly involve many business industries enabled by the restrictions that exist in financial institutions’ detection capabilities.

BIS mulls harnessing AI to combat money laundering networks

The BIS Study

In this context, the proof-of-concept (PoC) known as Project Aurora has utilized a huge collection of synthetic data representing physical local and international payment data, and privacy-enhancing networks that rely on machine learning and several other analytical tools while concurrently preserving encryption.

After executing the process, the research team trained algorithms on the project’s synthetic data to recognize various patterns and “typologies” linked to money laundering across organizations and nations.

BIS highlighted that between 2020 and 2022, costs of anti-money laundering (AML) efforts for financial firms “surged by around $60 billion, or more than a quarter, to approximately $274 billion,” while most of the latest efforts fail to deliver any meaningful results. Moreover:

“The payments systems landscape involves a complex interplay of private and public entities, including commercial banks, payment services providers, fintech companies, central banks, and regulatory authorities. This complexity often results in fragmentation, which criminals exploit.”

Hence, the project featured diverse perspectives on the synthetic data to provide various monitoring settings, including domestic, partitioned, and international, coupled with different methods of concerted analysis, such as decentralized, centralized, and hybrid models on national and international levels.

The Takeaway

It is critical to strike a balance between the benefits of artificial intelligence and the need to protect data security and user privacy. With sensitive financial information getting analyzed extensively by AI algorithms, security measures need to be implemented to guarantee compliance with privacy regulations and help safeguard customer data.

Responsible use of AI technologies and transparent governance infrastructures are crucial to increase trust among the stakeholders and guarantee the ethical use of artificial intelligence in combating money laundering practices.

Related: BlockGPT Launches Cutting-Edge AI Project Leveraging Blockchain Technology

As financial institutions and governments aim to catch up with majorly sophisticated money laundering strategies, AI offers a compelling solution to help address the sophisticated challenge. By using the power of AI, organizations can enhance their AML efforts, boost detection capabilities, and proactively fight the sophisticated web of money laundering syndicates.

With the current advancements in artificial intelligence and increasing partnerships between regulators, experts, and industry operators, the future looks bright. AI is expected to play an integral role in safeguarding the integrity of global financial networks and protecting communities from the severe effects of money laundering.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.