Remittance Service Providers Need Automated Crime-Fighting Solutions More Than Ever: Here’s Why

March 27, 2024
Remittances are an essential way to bring money into low-income countries and unbanked communities, but they are all-too-frequently used as a conduit for financial crime. By nature, money transfer and remittance are high-risk businesses.  Therefore, to ensure that financial crime is detected, banks and fintechs traditionally use rules to monitor transactions which may catch some crime but also result in a significant number of false positives and manual reviews. Adding to the challenge, remittance is a low-margin business requiring speedy transactions which means that providers aren’t constantly trying to reduce the need for costly manual reviews while remaining compliant – a zero-sum game using rules-based systems.  As remittance service providers scale their businesses to handle larger transaction volumes, they must adopt highly automated solutions to replace rules-based monitoring solutions to keep up with evolving compliance demands and deliver trusted, swift services.  The goal is to detect potential risks and threats reliably and effectively without compromising the quality of service. Only when they can reduce costs and capture efficiencies can remittance providers compete against other, lower-cost money transfer businesses while remaining secure.  A long list of challenges  Today, remittance service providers face increasingly high hurdles, including: Managing AML/counterterrorism financing (CTF) risk in the face of increasingly complex financial crime typologies. Keeping pace with global compliance requirements and increasing pressure to contain risks and coordinate efforts across multiple jurisdictions, increasing costs and time pressures for international payments.  Managing requirements across partner relationships and ensuring that partnership agreements don’t compromise service delivery guarantees. Accommodating crypto and digital currencies while meeting Know Your Customer (KYC) requirements.   These obstacles mount when remittance providers use legacy regulatory and financial crime risk management solutions, which struggle to identify many threats, often fail to capture the correct data to act quickly, and fall short in mitigating losses and avoiding regulatory breaches. Only financial crime-fighting technology powered by artificial intelligence (AI) can ensure easy, efficient, and trusted transactions worldwide.   The benefits of automated, AI-driven solutions include: Serve customers with speed at low cost: Remittance providers can’t afford to spend hours reviewing transactions because customers are always looking for the cheapest, fastest way to send money. With AI-powered AML, remittance providers can surpass competitors by quickly identifying risks and reducing operating costs. Detect unknown cases: Transaction monitoring systems are somewhat effective in identifying “known risks,” but they offer little in helping proactively mitigate “unknown risks.” By leveraging unbiased and semi-biased AI, financial institutions can recognize anomalies and find unknowns outside normal behavior, including entirely new typologies.  Expand risk coverage: With rules-based systems, remittance providers are limited in their risk coverage while risk-based AI systems are far more effective and efficient. Grow their businesses: With an AI-powered AML system in place,  100% of red flag coverage for all known money-laundering risks are detected using a multi-layered solution, including unsupervised, semi-supervised, and rules in cooperation. Identifying risks more accurately and precisely enables you to grow business with partners in high-risk countries and segments.  Boost operational efficiency: By using AI remittance providers can

How AI-Driven Customer Risk Assessment (CRA) is Transforming CDD

February 5, 2024
CMO Vered Gottesman asks CPO Dagan Osovlansky about ThetaRay’s new CRA product Vered: ThetaRay just launched CRA – Customer Risk Assessment.  What differentiates ThetaRay’s CRA from existing customer due diligence products on the market? Dagan: Customer due diligence (CDD) requires a comprehensive process covering multiple aspects of understanding the customer. ThetaRay’s CRA product focuses on the risk assessment aspect as part of this entire KYC (Know Your Customer) process. With our new CRA product, ThetaRay conducts a continuous risk assessment throughout the full customer lifetime, not just during onboarding.  Unlike traditional CDD solutions, which often rely on broad classifications and stereotypes, ThetaRay’s CRA product takes a deeper dive into who your customer is by assessing risks on an individual basis. This provides a more accurate and fair picture of each customer throughout their lifecycle. ThetaRay does this by taking data from both demographic/static sources as well as from current and historical transactions. We can assess the risk of a particular individual based on behavior, not just demographic information. So while it is true that certain static data points such as country of residence might be more correlated with financial crime, insights from actual behavior including transactions are more accurate.  ThetaRay’s CRA is fully automated and uses machine learning, which is very different from the rules-based systems available on the market today. With rules-based systems, you set certain criteria and give weight to whether or not the criteria were met and so on. The problem with this is the amount of data and indicators that can be included are very limited. Furthermore, current transaction and behavioral data is not even taken into account.  V: CRA allows you to configure the criteria and cadence of risk assessment throughout the customer journey. How does that work? D: We enable our customers to add criteria or change the weight of criteria, which gives them flexibility.  In addition, CRA allows for cadence calibration. Most due diligence cadences take place once a year for risky customers, or once every two or three years for low-risk customers. While more advanced solutions can trigger an assessment each time your KYC data changes, such as when you move addresses, it’s still based on the same time-limited capabilities.  To truly prevent bad actors from infiltrating banks, one needs to assess risk almost constantly. Thanks to the dynamic, automated process CRA offers, ThetaRay detects high-risk customers much faster compared to three-year-old KYC information that only tells a partial picture at best.  Furthermore, CRA’s superior accuracy means you’ll actually reduce the number of customers categorized as high-risk. That’s because during onboarding, a customer is assessed but only from existing demographic and other static data. As the customer begins to execute transactions every day or week, ThetaRay can assess customers based on behavior and adjust their risk. For example, maybe a customer’s geographic location has a significant amount of financial crime. However, when you see how the customer behaves and that his or her behavior matches the information in the KYC, it becomes

Anti-Money Laundering (AML) New Year’s Resolutions

January 15, 2024
Top Five Things Organizations Can Do to Modernize Their Approach to Addressing Financial Crime By Vered Gottesman, ThetaRay CMO

Kicking Off 2024: The Biggest AML Penalties of 2023

January 14, 2024
As we delve into 2024, it's crucial to reflect on the significant AML penalties of the past year. 2023 witnessed some of the largest fines in the industry, signaling a vital wake-up call for financial institutions

The Hidden Costs of False Positives And How They Impact Your Bottom Line

November 22, 2023
In the world of business, we're bound to encounter our fair share of shady dealings. Picture this: your customer is ordering, but their delivery address doesn’t match the address on their card. Red flag, isn’t it? Or, your loyal customer, Joe, is suddenly going all out with a massive order. That doesn’t sound like your usual Joe. And here's another head-scratcher – orders are raining in, but they're all small fries in terms of money.

Cracking Financial Crime: OpenAI Solution for a Futuristic Investigation Makeover

November 13, 2023
In today's ever-evolving landscape of financial crime, the integration of AI capabilities has become not just an option but a necessity. This strategic alliance between artificial intelligence and human analysts has the potential to revolutionize the way we approach financial crime investigation and reporting. At ThetaRay, we understand the power of AI in this critical domain and have embarked on a groundbreaking collaboration with the technology based on OpenAI to redefine the rules of the game.