Artificial intelligence (AI) and biometrics are revolutionizing regulatory compliance in fintechs and banks by providing more accurate and efficient methods of identifying and preventing fraudulent activity, as well as streamlining compliance processes.
Traditionally, compliance has been a tedious and time-consuming process, requiring manual checks and reviews of transactions and documents. But with the help of AI and biometrics, compliance is becoming a lot more efficient and effective. In a recent PaymentsJournal podcast, Micheal Sheehy, Chief Compliance Officer at Payoneer, and Marco Salazar, Director of Technology and Infrastructure at Javelin Strategy & Research, discussed the future of meeting compliance challenges.
PaymentsJournalThe Importance of AI and Biometrics in Regulatory Compliance in FinancePaymentsJournal The Importance of AI and Biometrics in Regulatory Compliance in FinancePaymentsJournaljQuery(document).ready(function ($){var settings_ap15495301 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"15495301",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_410093_29",settings_ap15495301); }catch(err){ console.warn("cannot init player", err); } });
The Future of Compliance Challenges
The biggest challenge for fintechs in compliance is the cost of implementing Know Your Customer (KYC), a process fintechs use to verify the identity of their clients and assess their potential risks for money laundering or financing terrorism. Fintechs may need to go through a KYC process when onboarding new customers, setting up new accounts, or conducting certain financial transactions. This typically involves collecting and verifying personal and financial information, such as name, address, government identification, and employment status. Fintechs may also need to monitor their customers’ activity over time to ensure ongoing compliance with KYC requirements.
“Especially when you want to be global and operate in multiple jurisdictions, you know, the different KYC nuances can be costly,” explained Sheehy. “The repercussions of not having an adequate KYC program or adequately funded compliance programs are significant. [That] there are $10 billion in just KYC fines last year globally just shows you how serious regulators are taking KYC.” Furthermore, different countries are developing different regulations so staying on top of everything is a challenge.
“Criminals are always trying … to find loopholes in the system,” Sheehy said. “So [compliance] is about being proactive. This involves having processes and procedures in place to analyze the trends that you’re seeing not only in your own transactions, but also at a more macro level within the environment that you operate in.”
As a company that interfaces with regulators and fintechs looking to meet those r...