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Artificial Intelligence, The New Weapon Against Money Laundering?

Will we finally have a fighting chance to combat money laundering once and for all? Laundering illegal funds is a growing problem, whether that’s through cash-only laundromats, buying and selling real estate, luxury cars, art collections or through businesses; it doesn’t have to occur in big amounts.



In reality, Money laundering is usually done via a method called “Smurfing“, it involves the use of either multiple individuals, and/or multiple transactions, making cash deposits that are within the non-reporting threshold as mentioned below by Mark Gazit, Chief executive of ThetaRay, a financial crime AI provider.

“A $0.25 transaction will never be spotted by a human, but transactions of that kind can launder $30m if they are done hundreds of millions of times” “[Some launderers have] hacked into thousands of ATM’s and programmed them to release up to five notes at a certain time – say 3 am – at which point a local criminal or ‘money mule‘ would pick it up. …The money was then converted into Bitcoin and used to fund human trafficking”

In a recent ATM scam, the loss to the banks totaled €1bn (£854m) across 40 countries.

Colin Bell, Group Head of Financial Crime Risk at HSBC states:

“Estimates suggest that not even 1% of criminal funds flowing through the international financial system is confiscated. AI that applies ‘machine learning’ can sift through vast quantities of transactions quickly and effectively. This could be a vital tool for pinpointing suspicious activity.”

The US Federal Bureau of Investigations is working on adding the the use of artificial intelligence as the next best tool for its fight against financial crime.

AI will be effective in spotting smurfing attempts and suspicious behaviour in general. It can swift through a mountain of data in real-time, including emails, phone calls, and data sources that humans may not be able to easily access or analyse.

Adam Williamson, Head of Professional Standards at the UK’s Association of Accounting Technicians (AAT) – a body tasked to help accountants avoid money laundering, states:

“Using AI removes much of the risk of people deliberately overlooking suspicious activity.”

There are AI firms such as QuantaVerse, Ayasdi, Capterra, IRIS that are offering products to businesses to tackle money laundering, however as with almost everything, there are always pros and cons.

I believe the biggest downfall to the use of AI technology is the fact that its dependent on the data that is fed into it, if limited data is being fed would it still be as effective in picking up suspicious activity?

The best time to utilize the full potential of AI in combating Money Laundering will be when information on flagged persons and/or businesses is shared widely by multiple businesses to collectively tackle this growing problem. So should the real question be, in our closed-off, data-protected, privacy-policy driven world, what is the true possibility of the full potential of AI being utilized to seriously stop the launderers in their tracks?

By Saad Malik, April 15, 2020, Published on Let's Talk AML

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