Remittance Service Providers Need Automated Crime-Fighting Solutions More Than Ever: Here’s Why

By ThetaRay writer 2 weeks agoNo Comments
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Remittances are an essential way to bring money into low-income countries and unbanked communities, but they are all-too-frequently used as a conduit for financial crime. By nature, money transfer and remittance are high-risk businesses. 

Therefore, to ensure that financial crime is detected, banks and fintechs traditionally use rules to monitor transactions which may catch some crime but also result in a significant number of false positives and manual reviews.

Adding to the challenge, remittance is a low-margin business requiring speedy transactions which means that providers aren’t constantly trying to reduce the need for costly manual reviews while remaining compliant – a zero-sum game using rules-based systems.

 As remittance service providers scale their businesses to handle larger transaction volumes, they must adopt highly automated solutions to replace rules-based monitoring solutions to keep up with evolving compliance demands and deliver trusted, swift services. 

The goal is to detect potential risks and threats reliably and effectively without compromising the quality of service. Only when they can reduce costs and capture efficiencies can remittance providers compete against other, lower-cost money transfer businesses while remaining secure.

 A long list of challenges 

Today, remittance service providers face increasingly high hurdles, including:

  • Managing AML/counterterrorism financing (CTF) risk in the face of increasingly complex financial crime typologies.
  • Keeping pace with global compliance requirements and increasing pressure to contain risks and coordinate efforts across multiple jurisdictions, increasing costs and time pressures for international payments. 
  • Managing requirements across partner relationships and ensuring that partnership agreements don’t compromise service delivery guarantees.
  • Accommodating crypto and digital currencies while meeting Know Your Customer (KYC) requirements. 

 These obstacles mount when remittance providers use legacy regulatory and financial crime risk management solutions, which struggle to identify many threats, often fail to capture the correct data to act quickly, and fall short in mitigating losses and avoiding regulatory breaches. Only financial crime-fighting technology powered by artificial intelligence (AI) can ensure easy, efficient, and trusted transactions worldwide. 

 The benefits of automated, AI-driven solutions include:

  • Serve customers with speed at low cost: Remittance providers can’t afford to spend hours reviewing transactions because customers are always looking for the cheapest, fastest way to send money. With AI-powered AML, remittance providers can surpass competitors by quickly identifying risks and reducing operating costs.
  • Detect unknown cases: Transaction monitoring systems are somewhat effective in identifying “known risks,” but they offer little in helping proactively mitigate “unknown risks.” By leveraging unbiased and semi-biased AI, financial institutions can recognize anomalies and find unknowns outside normal behavior, including entirely new typologies. 
  • Expand risk coverage: With rules-based systems, remittance providers are limited in their risk coverage while risk-based AI systems are far more effective and efficient.
  • Grow their businesses: With an AI-powered AML system in place,  100% of red flag coverage for all known money-laundering risks are detected using a multi-layered solution, including unsupervised, semi-supervised, and rules in cooperation. Identifying risks more accurately and precisely enables you to grow business with partners in high-risk countries and segments. 
  • Boost operational efficiency: By using AI remittance providers can reduce false positives by up to 80% compared with rules-based systems, leading to swifter investigation time and lower operating costs. 
  • Take a risk-based approach to financial crime: Using an AI-powered AML solution, remittance providers can understand the risk of a particular transaction.

Winning in an on-the-go world

Remittance service providers have a worthy mission: to provide a critical lifeline of support by broadening financial access and removing barriers for low-income and unbanked earners. But more than almost any other financial services segment, remittance providers face risks and global compliance requirements that can hold them back from competing with other faster, cheaper providers. Remittance service providers need sophisticated AML technology to grow revenue, ensure a high level of customer service, and win the trust of banks, fintechs, and regulators.  

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