AI’s Role in Anti-Money Laundering (AML) and Financial Fraud Investigations

February 2021

The exponential developments in the cyber realm over the last few decades have led to levels of convenience and efficiency that the world has never seen before. Unfortunately, these developments have also led to new vulnerabilities that criminals can exploit from anywhere in the world with internet service.

As many cybersecurity experts have pointed out, most cyber-facilitated crimes are crimes that have existed for generations or even centuries; human trafficking, drug trafficking, extortion, blackmail, theft, embezzlement, money laundering, and various types of fraud existed well before the internet was ever created. However, no one would deny that the web has been a game-changer, taking these crimes to new levels of speed, sophistication, ad globalization. The explosion in new payment services and digital currency have made investigations and law enforcement even more challenging, and have given criminals even more options to carry out and hide their actions.

Criminals have a history of capitalizing on disasters, and the current pandemic is no exception. Between the complex systems of multi-layered government payouts and the simple fact that more people around the world are conducting their financial transactions online, those who seek illegal online opportunities have more options than ever before, including stimulus fraud and Paycheck Protection Plan fraud. Additionally, activities like account takeovers, e-commerce fraud, identify theft, denial of service attacks, and other “standard” cyber-assisted financial crimes are likely to continue to increase. Even some of the most traditionally reliable methods for verifying identity are being circumvented as video and voice deep fake technology is enabling fraudsters to imitate customers, financial personnel, and various decision-makers.

Many governments have attempted to address these patterns of illegal activity through a range of multi-layered legislation and programs. However, AI may the most powerful tool for enforcing those efforts. Combined with human expertise, Artificial Intelligence has the potential to process the massive amounts of data involved in fraud and money-laundering investigations, empowering governments and law enforcement agencies to take decisive steps to curb those illegal activities. AI has the ability to adapt its own methods in order to “learn” as it finds, organizes, processes, compares, analyzes, and disseminates vital information, alerting its users to patterns, connections, trends, and specific instances that may indicate significant data related to any range of cyber-assisted crimes.

When applied to investigations of money laundering and other financial crimes, AI is often used to identify and analyze patterns that include the legitimacy of businesses, which may involve an examination of the geographical location, payroll patterns, owner identities and activities, registered documentation, investors, inventory and supplier patterns, and any other inconsistencies that may indicate that the business is not operating as reported. AI can also be applied to identify patterns in terms of deposit amounts, times, dates, and locations, as certain patterns (like making large cash deposits at 1 am on an irregular basis) could indicate nefarious deeds. Canceled credit and debit cards can also reflect potential criminal activity, as it is common for criminals to reserve a hotel room, car rental, or other goods or services with a credit card, and then to cancel the card and to pay the fee in cash. While this is done in an attempt to hide their transaction, investigative tools like AI technologies can detect these patterns and alert investigators.

Among the various uses and applications of AI in the fight against financial crimes, including money laundering, its analysis of OSINT related to electronic devices, institutions, locations, times, and related anomalies and patterns can be applied to the education process. As the systems develop, expand, and generate more valuable insights, governmental, law enforcement, and financial institutions may be able to better train their employees to identify and respond to the growing threats. This is a vital aspect of the continuing struggle to stay ahead of ever-evolving trends in global criminal activities.

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