This article indicates that using AI to detect fraud and automate regulatory oversight will prevent fraud and reduce costs. I can’t argue against this as Mercator currently tracks more than 300 RegTech innovators. However, we also know criminals use AI which indicates that your business solution needs to be prepared for the attack.
This implies operational data collected in near real time from multiple countries, company types, and business activities. It also implies frequent updates to the platform so your company remains inoculated against newly observed criminal activities:
“Given how pervasive digital crime is, the overall trajectory of the payments industry might seem counter-intuitive. More transactions are taking place online than ever before, meaning that finding fraudulent transactions is like finding a needle in a haystack that keeps growing. With millions of transactions being processed each day comes the need for regulation, so everyone at every step of the payment processing journey needs to ensure that they are compliant with evolving legislation. Because markets are increasingly global, they will also have to comply with potentially dozens more regulatory regimes from around the world. So how can organisations ensure that they are compliant while still giving customers the fast, pain-free services that they need? If we are to look at recent developments like the UK’s Kalifa Review of Fintech, we find that current systems like Anti-Money Laundering (AML) legislation and Know Your Customer (KYC) requirements are just the start. Regulations are going to keep evolving, Fintech companies will have to evolve to keep up and new regulations will have to be created for new and innovative technologies. So, how can companies keep up?
AI and RegTech working together to prevent fraud
A new wave of Regulatory Technology (RegTech) that utilises artificial intelligence (AI) alongside human expertise can now play a major role in assisting compliance teams with, not just complying with regulations, but preventing fraud and money laundering.
Rather than having developers rewrite systems each time legislation changes, the new breed of AI-enabled RegTech can ‘learn’, interpret and comply with applicable laws, including KYC and AML. No system will ever be perfect – there is still the need for human oversight and there is still the possibility for criminals to find loopholes. These criminals are increasingly using technology to exploit weak links in regulatory frameworks, but as fast as they can move to deploy new schemes, machine learning systems will be able to counter them.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group