AI-powered Technology Helps Banks Sharpen Anti-Fraud Strategy

Recent years have witnessed more rampant fraud cases such as telecom fraud, fake brokers, and romance scams. As scammers have adapted to evolving technology by using more sophisticated tactics or ploys to victimize users online, banks across the globe rack their brains out to prevent victims from transferring money to scammers' pockets.

Banks in China have always enforced stringent regulations on capital and money transfer. To further prevent telecom fraud, China's central bank planned to implement tightened regulation for anti-money laundering, which was originally expected to take effect on March 1.

It requires people who make a single cash deposit or withdrawal that exceeds 50,000 yuan or USD10,000 in a foreign currency, to report the source and intended use of the money. Banks and other licensed financial institutions handling relevant transactions must also validate and record client's information. However, the Central Bank announced on February 21 to delay the rules due to "technical reasons".

In a sense, strict rules can effectively curb fraud cases, but may also infringe on individual property rights. It It gives financial institutions more discretion and makes withdrawal and deposit process more troublesome. Capital flows may also be diversely affected, analysts have argued.

Now that legal ways do not work as expected, why not consider technical ways? According to a report published recently by NTI, an IT consulting agency, 57% of banks are using AI to beef up their anti-money laundering (AML) and Know Your Customer (KYC) processes. At the same time, many banks have launched AI-powered services to identify potential fraud cases and protect customers.

Days ago, Westpac started to automatically block suspect online transaction from overseas retailers deemed high-risk of involving in a scam. Anytime when a customer make an online card payment and a scam is detected, the deal will be aromatically blocked with an SMS sent to the customer.

Westpac started a trial last year with fruitful results. In total, it prevented 4,000 customers from stepping into 11,000 potential scams, saving more than 1.2 million USD. Its technology is able to analyse customers' transaction models, merchant behaviors, previous reports from other customers and to add/remove high risk merchants in a checklist.

ACI Worldwide, a global leader in real-time payments software, announced the launch of Fraud Scoring Services (FSS) platform in early March 2022, which has integrated incremental learning technology to offer advanced machine learning, behavioral biometrics capabilities, predictive analytics, and expertly defined rules.

Compared with strict rules, AI-powered technology can help financial institutions spot money laundering and telecom activities in the real time with more convenience and less cost to the economy. Even when a consumers' identity is stolen, sophisticated analytics can spot suspicious changes in consumer behavior before a transaction goes through.