In our rapidly digitalising world, financial crime is becoming more sophisticated. This evolution means traditional ways of checking compliance aren't enough. Manual checks, often done at set times, leave windows open for fraudsters to exploit. At SmartSearch, we believe that Artificial Intelligence (AI) plays a role in changing how we approach compliance, moving from a reactive, periodic exercise to a real-time and preventive discipline.
The difference between real-time monitoring and traditional compliance checks is core in the fight against financial crime. Old methods offer only a "snapshot" view of compliance, which happens at specific points like new client sign-ups or in annual reviews. This means that any changes in an individual's risk profile, or new fraud patterns that emerge between these checks, can easily go unnoticed, often until it's too late.
Real-time monitoring, powered by advanced AI and machine learning (ML), operates continuously. It constantly sifts through data, looking for anomalies and new patterns that might indicate suspicious activity. This continuous oversight drastically shrinks the window of opportunity for fraudsters. As Geraint Rogers, Market SME for Identity Fraud and Financial Crime at Daon, spoke on our SmartSessions podcast, "we are constantly evolving at the speed of fraud." This proactive approach means actively seeking out changes in how fraud works and responding immediately.
Our SmartDoc solution, significantly enhanced by our partnership with Daon, doesn't just verify an identity document when someone first signs up. Combined with our broader SmartSearch triple-check service, we continuously monitor individuals against important watch lists for politically exposed persons (PEPs), sanctions, and adverse media – every single day. If a previously compliant individual is suddenly added to a sanctions list, we immediately alert our clients. This ongoing vigilance is a stark contrast to a system where a critical change might only be discovered during a scheduled review. It fundamentally shifts the focus from simply recording past compliance to actively preventing future illegal actions.
The practical operation of SmartDoc provides concrete examples of AI's success in stopping financial crime before it happens. AI has successfully and automatically identified legitimate customers and swiftly processed their verifications. At the same time, it flags suspicious instances that previously would have required manual intervention or, worse, allowed fraudulent activities to proceed unchallenged.
AI directly helps prevent crime by blocking synthetic identities. By combining electronic verification (using credit agency data) with SmartDoc's document and facial verification, AI creates a robust defence against fake identities. This stops them from being used for widespread financial crime. This "extra layer of security" ensures fraudulent accounts can't even be opened.
AI's ability to scan for tiny discrepancies in documents, often beyond what the human eye might easily spot, acts as a direct prevention mechanism against forgery and manipulation. Whether it's an altered image, mismatched fonts, or inconsistencies in security features, the AI identifies these tell-tale signs of forgery in real-time. This prevents fraudulent documents from being used for illicit activities. Our system can even detect if a document is merely a photo, a printout, a scan, a laminate, or a counterfeit copy.
Our passive liveness detection and advanced facial recognition stops attempts to use stolen credentials or sophisticated deepfake technology for account takeovers. By ensuring the person presenting the identity is genuinely live and matches the document, AI prevents unauthorised access to accounts, a common route for financial crime. Our continuous watch list monitoring, powered by AI, ensures that if an individual becomes sanctioned or appears on an adverse media list after their initial onboarding, our clients are immediately alerted. This proactively prevents them from continuing relationships with high-risk individuals or entities. These tangible improvements and the robust, layered defence demonstrate that AI is a practical, effective tool preventing financial crime every single day.
However, with these immense benefits also comes both technical and ethical challenges.
From a technical standpoint, the quality and diversity of training data are key; AI models are only as effective as the information they learn from. Poor or biased data can lead to skewed outcomes. The sheer volume of real-time data also demands robust infrastructure and incredibly fast processing capabilities.
Another major hurdle is the "black box" nature of some complex AI models – regulators and compliance officers often need to understand why an AI made a particular decision, making model explainability crucial. Real-time processing also requires incredibly low latency, meaning systems must handle massive transaction volumes with virtually no delay to be truly preventive. And of course, fraudsters constantly adapt, so AI models must be continuously updated and retrained, demanding constant vigilance and agile development. We specifically chose Daon due to their proven track record of servicing larger clients, which helps us maintain high service levels as we scale.
On the ethical side, a primary concern is bias and fairness. If AI models aren't carefully designed and monitored, they can inadvertently perpetuate or even amplify existing biases found in historical data. This could lead to unfair or discriminatory outcomes for certain groups, which is unacceptable.
Ensuring ethical AI use is non-negotiable. Processing sensitive personal information for identity verification also demands the highest standards of data privacy and security, relying on robust encryption and strict adherence to regulations. At SmartSearch, no personally identifiable information (PII) is processed outside the actual search environment, always ensuring user data privacy and security.
Transparency and accountability are equally vital; it's crucial to establish clear lines of responsibility and ensure clarity about how AI is used in decision-making.
Finally, a crucial point is that AI cannot, and should not, work in isolation. Our SmartDoc solution embraces a hybrid approach, incorporating a manual review process for unique or complex cases that truly require human judgment and context. This "human element" is indispensable for addressing edge cases that AI might misinterpret. It ensures that trained professionals step in when necessary, providing a final layer of validation and security, combining cutting-edge technology with human oversight for the highest level of fraud prevention and compliance.
It's also critical to clarify that SmartSearch uses AI in an ethical manner and explicitly does not utilise generative or large language model AI. Our focus remains firmly on combating, not creating or enabling, sophisticated threats like deepfakes.
AI isn't just making compliance better; it's fundamentally redefining it. It's moving us closer to a future where financial crime is prevented in real-time. While challenges certainly exist, strategic partnerships, an unwavering commitment to ethical AI practices, and a balanced approach combining cutting-edge technology with invaluable human expertise are paving the way for a more secure, efficient, and trustworthy compliance landscape for everyone.