KYC360 News

The use of artificial intelligence (AI) in bank compliance departments can be highly effective, however it has limitations and remains a work in progress, according to Rob Gruppetta, head of financial crime at the UK’s Financial Conduct Authority.

Generally there has been a sharp interest in AI in various sectors across the UK, including banking and finance.

Banks have also made huge investments in compliance departments.

Trade bodies estimate British banks spend five billion pounds annually combating financial crime, a sum that is one billion pounds more than Britain spends on prisons.

Questions have arisen regarding AI and financial crime – such as whether machine learning and AI techniques could help in trawling through a bank’s transactions to detect suspicious activity in real time.

Data analytics and machine learning are widely seen as the approaches with the greatest potential to improve current practices, particularly in the field of transaction monitoring, said Gruppetta.

Other examples of the effectiveness of this technology include AI-driven anti-impersonation checks that evaluate whether photos in different identity documents match, and using machine learning to identify customers that may pose a higher risk and so warrant, say, a deeper probe into the sources of their wealth.

However, AI and machine learning cannot replace the human element, he said.

“How should machine learning sit alongside human decision-making? We see it as complementing, not replacing, human judgement. A feedback process is crucial to improving overall performance over time, with, for example, knowledge of which predictions were false positives (or false negatives) being used to continuously refine the model,” he explained.

“The machines can direct the humans to the cases of most interest. But the software will deal in probabilities, not absolutes, and a person will need to make the final decision about whether intelligence is passed to the authorities. People also need to be testing the machine and governing it.”

Gruppetta made the remarks in a speech prepared for the FinTech Innovation in AML and Digital ID regional event in London.

While AI has the capability to greatly amplify the effectiveness of the machine’s human counterparts, it will be a constant work in progress, he added.

“Any bank hoping for a black box in the corner that will sniff out the launderers will be disappointed, but the technology has the capability to better achieve what we all want: keeping finance clean.”

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