The Future of AML: Battle Between Art and Science? – Part One

New Anti-Money Laundering (AML) and Know Your Customer (KYC) products leverage the capabilities of tech such as AI and machine learning, enabling operators to almost automate their processes completely, which initially seems like a perfect solution, but some industry commentators believe there lies a fundamental risk in this.

Ray Wilson is a former Financial Crime Agent for Law Enforcement and is currently heading up the AML department for market-leading operator, NetBet. We caught up with Ray to hear his perspective on the future of AML in iGaming and how he sees our sector’s relationship with technology developing going forward.

What did the pandemic do to change the way the industry handles AML compliance? And do you think it highlighted any specific areas of improvement going forward as an industry?

“That’s a good question. I think as a result of the pandemic, we’ve seen a number of areas for improvement. In all honesty, there have always been areas for us to build on and if you are a genuine operator, who’s always trying to improve, then you should continuously be trying to identify areas for improvement. Now, with that being said, the Pandemic has highlighted a couple of errors. For me, the most notable is the responsible gambling and AML crossover. Identifying when that crossover happens in real-time and when we need to step in to potentially identify the concerns. What we’ve identified is that operators need to have a better ability to assess customers’ affordability at the earliest opportunity. This will truly allow them to spot these risks that arise from the initial responsible gambling concern.

“Another area for improvement, which I’ve seen, and I’ve noticed operators lacking a clearer understanding of is simply knowing exactly where their risks lie. I’ve been able to see this from working both internally with operators and doing my external work as a consultant. Having a better understanding and taking better consideration of all different types of financial crime. We talk about AML like it’s a bubble of its own, but it’s really financial crime. AML is a major part of financial crime; we need to understand all the complexities in order to build the most efficient AML strategies.

“A lot of operators won’t have strategies that are efficient to take into consideration all the associated risks. We’ve even seen recently in the news that Greentube were fined. One of the main reasons for the fine was that they didn’t understand the risks of the business. That’s what we’re seeing way too often in industry, operators still not having a good enough understanding of their own risks. The risks posed by customers, posed by interfaces and even posed by geographical location. The most efficient strategies are the ones that can build these processes and controls, having taken these all into consideration. Those are two main things that I say are the key areas for improvement post-pandemic.”

Many industry commentators believe that automation is the key to AML and KYC success. Do you think this is true? Is there no longer a need for a human touch?

“I do not think this is true. I think definitely for KYC, there’s a potential for it to be the forerunner. As this technology has evolved, it’s a logical solution to make the most of it in areas such as ID verification and setting up certain automated alerts. I believe our necessity to utilize the available technology is obvious. However, the impact of completely relying on technology means a lack of inherent staff knowledge. This is an area many industry operators have continued to fall short in. If we look at the UK, for example, and we look back on some of the operators that have been fined or had actions taken against them, very rarely do you see operators fined for not having the right systems or right technologies in place.

“However, we often see operators, being prosecuted for key staff or general staff not being able to take the correct actions or lacking the right knowledge to be competent in their role. This is not the fault of technology. This is due to the fact that the human aspect is so key but hasn’t been focused on as much.

“I think there’s almost a lack of appreciation for the importance of the human element. The human is the most important part of AML. It’s about really finding a way to get the humans to undertake the highest value tasks. AML is not a science it is an art. I’ve seen this firsthand being involved in a number of high-profile financial crime prosecutions during my time in law enforcement. They’re all different and have their own unique features. So, it’s not a science, it’s definitely an art and will always need a human touch regardless of what technologies come about in the future.”

With so much new technology emerging in the market, how do you discern, which has the most value and which do you think has the most potential for taking AML and KYC processes to the next level?

“Over the last 6 months, I spent a lot of my time in meetings with different providers trying to upsell me an AML KYC solution. So, it’s definitely difficult to discern which products provide the most value. But, as mentioned in the previous question, the real challenge lies in really trying to identify where technology provides the most value, just in the same way we need to identify where humans provide the most value. Once we can discern that, then we are able to get the technology to support the human element and vice versa. So, there’s definitely great value in the new emerging technology. We’ve seen open banking, which I think can really take off and this can really allow operators to handle KYC in a more efficient and robust way. Considering the adoption from the customers and industry in general, I think that’s definitely something that can take KYC to the next level in terms of AML.

“Again, as I said, it’s a case of how we can get AML technology to feed into AML, to allow the humans to do the highest level tasks, because that’s where we need to get the humans interacting with our customers. I think that’s the potential for AML to be improved in the future rather than technology taking over AML is again, how can technology support the human element of the AML function.”

Editor’s Note:

After hearing from Ray, it seems clear that the future of AML lies firmly within the hands of new tech such as Ai, Machine Learning and even Open Banking. However, we are cautioned that if this aspect is too heavily focused on, sidelining the human element and need for educated staff members, the prosecution of operators we’ve seen in the media recently, will only continue. The challenge now is to find the divine balance between machine and man.

Part two of this interesting discussion on the future of AML will be published next Tuesday 11/01/22.