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AI AML Software Trend Continues with Deutsche Bank’s Adoption of Finantix

At the beginning of July, Finantix announced that Deutsche Bank Wealth Management selected its AI-powered Finantix KYC Solution to help enhance the bank’s client onboarding and know-your-client (KYC) processes. The solution is already up and running in Germany, Deutsche Bank’s largest wealth management centre and the bank is now set to roll it out across the US.

Solving a pressing problem

Deutsche Bank has been having a difficult time recently. Over the past week the bank announced 18,000 job cuts, including the closure of its equities trading business and the trimming of its bond and rates trading operations. Interestingly, it was rapped on the knuckles by regulators for anti-money laundering (AML) program failings in its corporate banking and securities division. The UK Financial Conduct Authority (FCA) levied its biggest AML fine ever against the bank — £163 million – for those failings in early 2017.

Most recently, the bank is under investigation by supervisors globally for allegedly processing transactions linked to the Russian crime world. Deutsche Bank is hardly alone in its AML troubles – global regulators are ratcheting up their focus on enforcement, publicly reprimanding and fining firms. As a direct result, many banks are renewing their interest in the next generation of AML software solutions.

Generally speaking, AML programmes within banks are facing two kinds of challenge – “greater efficiency is one of the key elements, and the other is risk mitigation,” says Alessandro Tonchia, co-founder and director of Finantix, which is based in Venice, with operations around the globe . “If you do AML KYC checks manually, and you aim for speed and efficiency, you might open yourself to risk. If you are too thorough, you might cover the risk, but you will need a very high number of analysts to do searches and all the required checks.”

By efficiency, Tonchia means a combination of the ability to conduct AML checks quickly and correctly, so that risk is controlled well and the customer onboarding experience is enhanced. According to Tonchia, studies show that fulfilling KYC processes can take wealth managers over 30 hours and can be drawn out over many weeks. It’s also estimated that screening high-risk clients requires an average of 5.4 hours while even low–risk clients still require 1.6 hours. Analysts can be faced with the task of reading thousands of documents.

The other challenge is that firms often are limited by their current technology and the language capabilities of their analysts in terms of the sources they can use, and this can create significant risks. For example, if a Thai newspaper has negative information about a potential client but the firm’s AML program cannot read and analyse documents written in the Thai language, it’s likely that the firm will not be aware of potential risks that the relationship might pose, from an AML perspective.

Moving towards holistic KYC

The Finantix solution uses natural language processing (NLP), a form of artificial intelligence (AI), to read large volumes of documents and identify the key risk relevant factors. The solution processes documents in 35 languages, covering most major markets. Importantly, within the solution firms can select which risk events are relevant, given their specific risk appetite and related policies. For example, firms can select by country, industry, and level of closeness to politicians.

Enhanced and more automated KYC capabilities can enable sales teams to do pre-checks on potential clients before even going to a first meeting with them. This saves the firm a lot of time – the firm doesn’t even need to have the initial meeting if it discovers in advance that a potential client would not meet its KYC standards – and reduces the level of risk that the firm is exposed to. “The more you front-load those checks, the easier the onboarding process is for the client, and the better their overall experience” says Tonchia. “It is more effective for the bank because they won’t waste time on clients that are not ‘attractive’.”

According to Tonchia, the speed and efficiency of the Finantix solution also enables the idea of continuous monitoring – which regulators in many jurisdictions are now asking for – to become a practical reality. The Finantix solution can perform automatic daily scans of news for existing clients and detect emerging risks in a timely fashion.

This continuous monitoring capability means that firms can track not just risks within their existing wealth management client base, but also opportunities. “With the tool, you can discover risk-relevant elements, but you can also look at other elements of the client relationship that might be interesting commercially or in terms of the intimacy of the relationship with the client,” says Tonchia. “We would like to position KYC as ‘know your client’ in the literal sense of the word – having a holistic understanding of your client. Armed with a wealth of structured and unstructured information about a client, wealth management teams can be more ‘on the spot’ in how they serve their clients.”

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