Artificial Intelligence and Machine Learning have entirely transformed how banks and financial institutions perform KYC processes. AI and ML can explore huge data volumes to identify high-risk clients to detect and prevent money-laundering activities. These technologies are precious for performing repetitive KYC services, saving the bank time, resources, and effort to invest in more productive tasks.
AI and ML technologies automate different parts of the client lifecycle management, particularly in areas that are time-consuming, error-prone, and labor-intensive at present. For instance, Natural Language Processing (NLP) reads vast amounts of data in multiple languages, enhancing the KYC processes through intelligent document scans. Therefore, it significantly enhances the overall onboarding experience for clients and eases the identification of high-risk clients to prevent financial crime.
Here are different ways AI and ML have affected the efficiency of Know Your Customer (KYC) processes.
- Working with Complex Data Webs
AI and ML can read vast data amounts (structured or unstructured) in minutes and derive implications to produce accurate and comprehensive risk profiles on individuals and companies. It benefits the compliance teams who need to work with complex data webs on owners, associates, directors, and shareholders. Consequently, they can draw correct conclusions to dealing with a risk-based approach.
- Risk Profiling and Due Diligence
AI automatically creates and updates a client risk profile and matches it against the high, medium, or low-risk classification. Therefore, it helps ensure constant compliance throughout a client’s lifecycle. Besides that, the technology simplifies the high-risk client identification process to enhance the due diligence process.
- AML Investigation and Screening
False positives are a significant challenge for bank KYC services and compliance teams. AI and ML underpin the generation process and minimize false positives. Not only alerts, but the processes also link them to relevant data and produce a graphical and accurate representation. By leveraging previous steps in the investigation process, AI and ML formulate a robust approach with the recommended actions.
- Document Management and Client Onboarding
By automating the workflow, AI and ML transform documents generation and help them manage better. They also automatically produce reports, alerts, notifications, and audit trails to streamline the client onboarding process.
- Compliance Management
AI and ML are capable of detecting patterns in vast amounts of data. As a result, they become more efficient in understanding the ever-changing regulatory infrastructure and managing it better. Furthermore, Natural Language Processing (NLP) analyzes documents, classifies them, and extracts valuable information like products, processes, and client identities. Regulatory changes can significantly impact them. So, AI sends notifications about the recent changes to keep the bank, and the clients remain updated about them.
AI and ML significantly affect the Know Your Customer (KYC) processes efficiency by doing the following:
- Performing remote KYC operations
- Assessing customer risk with cognitive computing, robotic process automation, and natural language processing
- Screening customers based on sanctions, watchlists, and media
- Profiling and segmenting customers according to their real-time transactions
- Analyzing links to uncover complex, hidden, multilayered networks
- Unearthing clues to identify complex ways of money-laundering
- Providing dynamic reports in varied formats
All in all, AI and ML are instrumental tools to fight against financial crimes. Making the best use of them with the help of professional KYC services will let a bank or financial institution take hold.