Preventing criminals from laundering illicit proceeds, funding terrorism, or committing other financial crimes such as fraud continues to be critical for banks across the globe. What’s more, the cost of achieving these objectives has never been so high.
Financial criminals often choose to launder their illegal proceeds through shell companies due to their ability to disguise ownership and provide opportunity for tax evasion and tax avoidance. Making matters worse, financial institutions generally lack an effective mechanism to link common red flags or “rules” associated with how shell companies operate.
A key source of liability for financial institutions is counterparty risk which is specific to the behavior of a financial institution’s client as well as the behavior of their client’s clients and counterparties. Unfortunately, legacy transaction monitoring systems (TMS) have little to no ability to see risk, assess risk, and make decisions about whether to accept the risk.
Anomalies in volume (the number of transactions) and value (the monetary value of the transactions) can indicate the presence of unusual activity potentially representing serious financial crime facilitated by the use of counterparties. An automated solution powered by AI and machine learning technology can help financial institutions by enabling an understanding of who the clients and counterparties are, and by raising up and documenting details around anomalous transactions for human investigators to expeditiously evaluate. Advanced AI solutions can go even further by automating the determination of whether or not transactions are consistent with expected behavior by predicting future behaviors on an account by account basis.
The AI-powered QuantaVerse Automated Volume and Value (V&V) Transaction Analysis solution provides risk managers with better insights into variances in account activity that might indicate risks of financial crimes, or that suggest an account is being used for something other than its stated purpose. Analysis of this nature is a growing regulatory burden driven by the expectation that FIs understand the risk profile of clients as well as their clients’ clients. While current rules-based efforts by financial institutions focus on account-level V&V, QuantaVerse analyzes the behavior of individual transactors (counterparties and clients’ clients) to identify anomalous activity.
The QuantaVerse solution monitors the volumes and values of accounts, predicts future expected activity, and highlights risk indicating variances. This analysis is conducted on an on-going or periodic basis, which is adjusted according to a bank’s management and reporting requirements. The solution supports transaction types such as in/out bound, SWIFT messages, Fed/Chips, and all jurisdictional clearing houses to identify and score risk based on behavioral anomalies of both clients and their counterparties. It also drills down into correspondent bank and other contributing counterparty activities where these risky anomalies are often found.
QuantaVerse has separate observables for credits (Volume In / Value In) and debits (Volume Out / Value Out). For those customers working with QuantaVerse who offer correspondent banking services, V&V activity can be monitored for their Foreign Correspondent Bank (FCB) accounts.
What’s more, the QuantaVerse solution utilizes algorithms that are more effective than averaging, sliding window, and weighted averaging techniques because QuantaVerse is developed to account for long-term trends, such as growth over time, and seasonality that standard, out of the box algorithms are unable to accomplish. Additionally, QuantaVerse generates an individualized set of predictions for every entity which does a much better job than standard algorithms of understanding what activity is normal versus anomalous for each individual entity.
By understanding the purpose of an account and, through analytics, determining and continuously checking that accounts are being used for their stated purposes, financial institutions can expose and eliminate risky clients.
For more information on the QuantaVerse Automated V&V Transaction Analysis solution, please visit: https://quantaverse.net/our-solutions/anti-money-laundering-aml-solutions.