Around the globe, bribery, corruption and other financial crimes are continuing to increase in scale and diversity which have serious adverse effects on the worldwide economy. As recently reported by the press, the Monetary Authority of Singapore (MAS) and Indonesian banking regulators and agencies are investigating the suspicious transfer of approximately $1.4 billion USD in 2015. The transfers originated from private banking accounts from the island of Guernsey and ultimately terminated in Singapore accounts.
The latest reporting indicated that some of transfers were directly linked to Indonesian military officials. An Indonesian official noted that transactions could be considered as money laundering if the assets were transferred overseas to evade taxes and the investigation will check if corruption played a role in the transfer.
According to Yustinus Prastowo, executive director of the Centre of Indonesia Taxation Analysis (CITA): “Normally, there are three reasons for funds being stashed in tax havens: government officials hiding money [gained] from corruption, business people avoiding taxes and drug dealers keeping their money safe.”
There is a plethora of potential financial crime and anti-money laundering (AML) concerns evident in this case, such as tax avoidance/evasion, corruption, money laundering, politically exposed persons (PEP), and high-risk jurisdictions.
Mitigating financial crime risk is challenging by any definition, but managing the risk effectively and efficiently is now becoming easier through new applications of artificial intelligence (AI) and machine learning solutions that complement existing transaction monitoring systems (TMS) in use by financial institutions.
If the aforementioned banks had utilized an AI and machine learning solution to analyze the suspicious transfers during the above-cited investigation, then the private banking accounts would have been holistically examined with related correspondent account activity as part of an enterprise financial crime mitigation approach. An AI and machine learning solution would have quickly identified groups of suspicious transactions flowing from Guernsey to Singapore rather than relying on static rules-based TMS.
Additionally, a perpetual know-your-customer (KYC) solution could have been utilized with predictive analytics on the customers’ past, present, and future transactional activity. The perpetual KYC function would also incorporate instant adverse media/PEP checks rather than waiting for a yearly to five-year KYC update.
By supplementing the traditional review of transactional and customer data, financial institutions can greatly enhance their reputational, operational, and legal risk exposure by deploying advanced data science and AI techniques that are available today. Other techniques include entity resolution and verification, UBO analysis, deep Web analytics, NLP (Natural Language Processing), Web scraping, network analysis, and volumes and values analysis.