PHL BANKING SECTOR UPS DEFENSE AGAINST MONEY LAUNDERING

THE Philippine banking industry is committed to investing in technology for financial crime compliance in the year ahead as most of the local financial institutions believe that artificial intelligence (AI) can help counter money laundering. Global analytics software firm FICO revealed in its survey that 100 percent of the banks claimed they will continue to shell out funding for compliance in the coming year. However, only 41 percent said they plan to “significantly increase” the investment in 2021.

“This survey, conducted in May, shows that even in the recent economic downturn triggered by the pandemic, banks remain committed to targeted spending that boosts their AML [anti-money laundering] compliance defenses,” said Timothy Choon, FICO’S Financial Crimes Leader in Asia Pacific.

“There is an increased willingness to perceive compliance and fraud as a common financial crime risk—a fraudster is more likely to launder money, and vice versa,” he added.

The same trend is also seen for the rest of the Asia-pacific region, FICO said. Majority or 93 percent of the banks are likely to continue

investing in technology to upgrade or enhance their compliance systems.

Apart from the Philippines, FICO listed Indonesia, Australia and Thailand among the markets that would invest the most in 2021.

“This convergence is a global trend. Banks in the US and the UK are well on their way to fully integrating their compliance and fraud functions, bringing together teams, leaders and technologies,” Choon said. “We believe banks in Asia-pacific are looking to these markets to see what will work, with plans to follow quickly in the next 24 to 36 months.”

Meanwhile, 73 percent of the local banks said that AI can fortify their systems to combat money laundering. However, “many remain unsure how to operationalize the advanced technology.”

Despite this, 95 percent still claimed that the older rules-based technology in AML systems is still reliable, but 36 percent said “they experience significant struggles modifying them.”

While rules-based compliance systems remained to be heavily used in Asia-pacific, Choon said that some banks are already using AI to keep up with the level of threats now.

The FICO official said that it might be best to use the advanced AI technology along with the old rules-based systems.

According to FICO, banks are improving their financial crime strategy to provide better customer experience and to avoid reputation damage and financial losses.

“Banks are challenged by the need for more information to deal with high rates of alerts from ineffective systems, while not vexing customers with incessant due-diligence questions,” Choon said.

FICO produced its Integrated AML Compliance Survey in May with over 250 senior executives from banks across the Asia-pacific region as respondents.