How technology can play a crucial role in mitigating financial crimes

A robust financial sector is a vital prelude to sustainable growth. Therefore, it is imperative that considerable effort is invested by private and public entities to ensure that the financial ecosystem is largely immune to malicious activity, thereby safeguarding economic integrity.

Amid regulatory support by authorities and strong checks and balances, financial institutions locally, in the region and around the world, have built tenacious anti-money laundering (AML) and compliance frameworks, but the ‘fight’ to mitigate financial crimes and money laundering (ML) isn’t the wheelhouse of banks alone – according to recent regulations, it must be a priority for other players as well, namely real estate brokers and agents, dealers of precious metals and stones, independent account auditors and company formation service providers.

“Owners of smaller companies are feeling very uneasy. They don’t have fancy budgets to buy an expensive compliance software. Neither do they have a mature AML system, because before the recent update, they were not expected to track financial crimes at this level. They are also under pressure to upgrade quickly, to avoid heavy fines,” says Amal Sharma, sales director of tech development company Effiya Technologies.

The Effiya Compliance Suite, developed by consultants who have jointly delivered more than 200 engagements in the domain of anti-financial crimes, integrates with multiple client systems (KYC/CDD, Swift, core systems). It offers an investigation module with visual features within the solution, offering a window to see who customers are transacting with, data of whom is collected and analysed.

“We have explored ways for [smaller] companies to overcome each of their compliance challenges. With the Compliance Suite, one doesn’t need to know programming. Users can create and update everything via a simple drag-and-drop interface. Generally, relevant software is mainly designed for large organisations with expensive hardware required to run it. However, Effiya’s solution can scale from hundreds of clients to millions. If the organisation is smaller, the solution will easily run on a simple computer.”

Effiya’s AML solution helps manage compliance regulations in an effective manner. The solution hosts a decision engine where AML rules can be conveniently configured by the customer while its proprietary ML-based analytics engine is custom built to manage alerts.

Key checks
The detection of financial crimes has been automated for more than two decades, yet most predictive models fail to identify malicious activity, notes Abhishek Gupta, managing director, Effiya Technologies, attributing them to three key reasons.

“The primary reason is poor data quality that leads to unsatisfactory predictive power in the end. On occasions, basic information isn’t available, while on others, data isn’t missing in the source system, but the problem lies in the way it is stored and processed. However, data quality can be improved by manual checks or with the help of a data management software. Secondly, definitions aren’t right. If you mix two disparate definitions, the predictive power of the model drops. And third is the human factor – modeling is 80 per cent science and 20 per cent art. Education, experience and IQ are equally important. If you don’t hire the best talent, your team may not see how particular variables influence the outcome, and your model will prove to be weak.”

Operational resilience is critical to the future of financial services. Hence, strategic development in areas of business growth must be complemented with compliance-driven investment, that will benefit financial institutions and other companies by equipping them in their fight against increasingly sophisticated financial crime.

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