Balancing humans and machines: The case for augmentation in compliance


Harriet Holmes

AML Services Manager

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When it comes to compliance, it’s hard to decide where to draw the line between human and machine. What are the risks of adopting new technology versus keeping the status quo? What should be automated, and where should augmentation be used instead? And what’s the difference anyway? Let's start answering these questions by defining the two terms which are often mistakenly used interchangeably.

Automation - the more commonly used term - is where technology fully replaces human decision-making and actions. Augmentation, on the other hand, uses technology to support and enhance human decision-making and actions. 

As any dystopian sci-fi thriller will highlight, excessive dependence on technology can cause problems. A recent real-life example of this is this rather unfortunate use of Sat Nav technology.

Some of the most effective technologies available today complement our human capabilities. They can help us to identify potential risks and take necessary actions. Technology can’t replace the value that humans bring, but when used correctly, it can enhance efficiency and in some cases act as a protective shield.

The augmentation of anti-money laundering 

Due to its nature and complexity, it’s difficult to imagine a time when anti-money laundering (AML) processes will be fully automated. However, innovation and the drive to reduce costly manual practices have led to widespread adoption of technology across all sectors. Digital innovation has created a significant impact within regulated industries, as providers build products to enhance and galvanise compliance processes. 

What benefits does augmentation provide?

Technological augmentation does more than just speed up processes by reducing time spent trying to get the printer to work, or calling clients asking for a copy of their passport. Utilising technology to enhance compliance work has a huge variety of benefits, including but not limited to:

  • Providing a deterrent to criminals, reducing instances of crime

  • Preventing financial crime 

  • Reducing admin time and eliminating low-value manual processes

  • Minimising reliance on human control, reducing bias and human error

  • Increasing accessibility of data and sources

  • Identifying and cross-referencing information

  • Increasing consistency in internal controls, creating clear audit trails

  • Proving access across geographical or other boundaries

  • Standardisation of data and record keeping

  • Continuously updating information

What’s available today?

The ongoing global quest for innovation has ignited a transformative wave, yet, as is often the case, certain sectors have benefited more than others. Fortunately, many augmentative technologies have already been developed to help businesses safeguard against financial crime. 

  • Digital identity verification (IDV) technology has drastically transformed customer due diligence (CDD) for the better. IDV technology has not only reduced time spent and improved user experience, it has also enhanced protection for both businesses and their clients with advanced security, risk exposure and more thorough, unbiased analysis.

  • Screening technology has reduced the sometimes overwhelming manual burden firms face when trying to understand the potential risks their clients present. Screening technology has increased the accessibility of huge volumes of data through a greater number of sources, giving businesses increased reach and quality, comparable data at their fingertips. 

  • Ongoing monitoring technology has been developed to provide a continuous feed of information to the relevant parties, identifying and notifying when updates and changes could affect the level of due diligence required. This enables firms to monitor their client base for changes that would affect the overall risk profile and act accordingly. 

  • Sources of funds identification and verification technology collects and provides crucial information about clients' funds, including corresponding evidence. Advances in SoF technology are helping to eliminate the risk of tampering, and interception while providing increased security and accuracy with corroborated sources, better user experience, and more accessible reports.

Top Tip: All processes, including those that include technology, should be closely monitored to ensure accuracy and effectiveness.

Understanding the risks

Examining risk is inherent for professionals working within the compliance space, outlined below are some key considerations that must be understood when designing processes inclusive of both humans and technology. 

Limitations of a manual approach 

Traditional methods of undertaking CDD predominantly rely on people within our organisations and processes that have been developed over time. Humans are inherently vulnerable to being misled, falling victim to fraud and making mistakes. Listed below are some key areas of risk which firms face when utilising a manual approach to compliance:  

  • High-quality fake identity documentation 

  • Easy access to online templates used to falsify evidence 

  • Dishonest clients, and individuals who are not who they say they are

  • Dealing with complex, high-risk clients 

  • Lack of depth of data and sources, limited by source availability

  • Difficulty evidencing controls and processes

  • Human error including data entry and misread information

  • Staff who have not received adequate training

  • Misunderstanding of regulations and the law

  • Bias and inconsistency during due diligence processes and reviews

When designing CDD processes, you must consider what you are missing by using an exclusively manual approach and the potential risk this presents to you, your firm and your clients. Manual processes are rife with potential for human error,  people inevitably make mistakes, especially with the sophisticated ways in which criminals look to exploit professional firms. 

The risk of a digital-first approach 

Like manual, human-driven processes, technology has its own unique risks. Firms must be aware of the pros and cons of the utilisation of technology and apply the same consideration given to manual processes. When reviewing a new technology, compliance teams will need to consider a multitude of factors including whether it is a good fit for the firm, clients and risk exposure levels. 

The objective of technology is to equip employees with the knowledge and information they need to support them in generating confidence and mitigating risk. But what dangers should we be aware of when implementing or increasing the use of technology within our processes?   

  • Over-reliance on technology 

  • Lack of engagement including unread or unreviewed 

  • Lack of understanding of the results and report methodology 

  • Cyber and data security concerns

  • Privacy of clients

While using technology comes with challenges, we can put in simple steps to reduce those risks. Over-reliance is mitigated by utilising peer-to-peer reviews and audits. Lack of engagement and understanding can be resolved with ongoing training and file review systems while data security can be managed through the implementation of technology that meets industry and regulator standards. It is crucial to give a high degree of consideration to how and when technology is used in compliance processes and regulators will want to see evidence that any tools being used have been assessed thoroughly. 

The winning combination  

There isn’t a magic bullet or single solution that will solve the myriad of constantly evolving challenges which compliance teams face on a daily basis. Technology will never completely replace the value of natural intelligence and insight, you simply can’t outsource human understanding. It is the augmentation and redesign of AML workflows to incorporate technology that can provide regulated professionals with the tools they need to succeed in an increasingly competitive environment. 

Compliance professionals who are innovating through dynamic process design, thoughtfully combining technology and human ability are generating major advancements and redefining their industries for the better. The intelligent incorporation of technology is doing more than simply reducing grunt work and speeding up processes, augmentation presents opportunities for firms to enhance their team's capabilities and improve decision-making, actions and outcomes. 

Ultimately, although digital augmentation will continue to revolutionise regulated professions, human oversight, understanding and interpretation will remain pivotal. The underlying goal of any augmentation strategy should not be to replace human input but instead to support and enrich compliance teams, enabling them to continue to protect society from fraud and money laundering.

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