Automated Compliance & eKYC: Total AI Takeover?

Will automated technology like eKYC replace the role of humans in financial compliance? We took to artificial intelligence for some answers.

Published on February 16, 2023
Last Updated on June 19, 2023

By now, most, if not all, have experienced firsthand the large language model developed by OpenAI, ChatGPT. Taking the world by storm, it seems to have just gotten its footing, setting the stage for future iterations and usage of the platform. For some, it will spell a completely different procedure for internet searches, while others will use it to code more efficiently and uniformly. Eventually, more will find generalized and more niche uses over time.

What is eKYC’s Effect on Compliance According to AI?

I asked ChatGPT two questions: the first, “How will the evolution of electronic know your customer (eKYC technology) displace current processes in the financial crime compliance services sector?” And the follow-up, “Will this technology replace humans?”

Before the introduction and implementation of AI/ML technology like eKYC, financial compliance practices were seen as inefficient, inaccurate, difficult to scale, and costly. These required practices were also main contributors to a negative customer experience in banking. In fact, a Thomson Reuters survey found that 89% of companies have had a negative experience with the KYC process. 

At the same time, these eKYC practices still remain part of the essential backbone of compliance regimes in the ongoing battle against financial crime and fraudulent activities that affect so many around the globe. Banks, governments, non-profits, and other organizations have dedicated vast amounts of resources (most notably, people) to combat these issues, but just throwing people at a problem won’t always solve it.

It’s no longer good enough to simply keep up with the bad guys—you’ve got to re-engineer your approach to how you play the game if you hope to win.

eKYC technology can change financial crime compliance services in many ways (and ChatGPT agrees):

  • Better efficiency.
    • Many manual customer identity verification processes like document authentication can be automated via Digital KYC, resulting in quicker processing times and lowered costs.
  • Better accuracy.
    • Identity verification technology can make compliance screening more accurate by detecting possible fraud or financial crime patterns through advanced algorithms and machine learning.
  • Increased scalability.
    • eKYC verification can reduce financial crime risk and increase the scale of compliance screening when integrated into digital platforms’ onboarding processes. The more automated the verification process, the faster things move for the customer.
  • Enhanced customer experience.
    • Digital identity technology removes the need for in-person processes and physical documentation, making for a more secure and convenient onboarding experience with financial institutions, also leading to increased customer satisfaction and retention.
  • Lower regulatory compliance costs.
    • Digital KYC technology can reduce compliance costs and risk of penalties by making regulatory requirement compliance more efficient.

And that’s all great—until we start asking ourselves what advances like eKYC spell out for the future of our professional longevity in the financial compliance space. Seems like a few years down the road, AI and machines are going to have a decent handle on the situation, rendering us humans obsolete…

Rethinking Your Role

But before you start down that inevitable path of worry, take a moment to reevaluate the answers above: “Greater,” “Better,” and “Reduced.” These are all quantitative measurements based on some foundational assumption about the space—mainly, that goalposts don’t move, that lines don’t blur, and that people are 100% predictable. Which, if you’ve spent any time in the compliance or anti-fraud world, you’re probably chuckling while you read this line. No, eKYC technology is not going to take your job. At least, not in the way you think it will.

A computer is not going to take your job. It will take aspects of it though—but that’s because your job will evolve, too. A world in which the less analytical, more repetitive, and manual-in-nature work is performed by an algorithmic AI—instead of a comprehensive, complex, highly-trained analyst—is becoming our reality. Up until now, highly-trained analysts have had to do the job in part because there was no one (or thing) else to do it. The work is paramount to the success of the organization’s compliance needs, yet, it seems almost wasteful on a compliance professional’s neural capabilities to focus on larger, more complex, investigative projects.

With AI technology, that situation changes, and your prerogative as a financial crime compliance professional will need to as well. You’ve now got access to a resource—that does not require any rest and can work many times faster than we can as human beings—focused on completing the repetitive, mind-numbing tasks that many of us will find tiring and frustrating. Add in your experience and knack for comprehensive financial crime analysis, and you’re changing the math.

When you realize the work you’ve been freed up to focus on (thanks to AI) is meaningful and has a direct impact on the people and organizations you’re responsible for protecting, there’s unquestionable value creation. Now take this scenario and scale it across organizations through solutions like compliance outsourcing, and you’ll really be changing those numbers.

digital kyc

Adapting to Advanced Tech

Arming yourself with the most effective toolsets to help you do your job makes a monumental difference. When asked how he would approach the challenge of cutting down a fully mature oak tree in less than six hours with nothing more than an axe, Abraham Lincoln replied, “I’d spend the first 5 sharpening the axe.” In the same vein, technology and its deployment and implementation are major differences in how we can get things done, whether it be “better,” “greater,” “reduced,” etc. But a sharpened axe without the skilled individual to wield it is simply a tool. It takes the right kind of individual to unlock the value of a tool like AI, and as it happens to be, that individual exhibits many (if not all) of the same traits that probably got you into the world of compliance to begin with.

Instead of trying to beat a machine (or AI) at what it’s exponentially more capable of doing and desperately grasping to hold on to your current responsibilities, flex those curious, creative, investigative neural pathways to elevate your level of thinking, and start tackling the more complex financial services challenges that require humanistic logic and analysis you just can’t get from a machine. Then you take the fight back to the criminals—find new opportunities to apply the work you do to make a real change in the fight against financial crime.

eKYC can improve compliance screening efficiency and accuracy and automate manual processes but it is not likely to fully replace humans in financial crime compliance. Yes, even ChatGPT answered this for my second question. People will remain essential in financial crime compliance in the following processes and roles:

  • Risk assessment of financial crime risk through human judgment skills and expertise, considering factors such as customer behavior
  • Investigation through critical thinking and utilization of analytical skills to investigate and examine suspicious activity, human beings still reign supreme over AI
  • Decision making on how to respond to a situation where financial crime might be involved. Drawing connections to otherwise unrelated data points is also a blindspot for AI. Over time they will get “smarter,” but only through the direction and help of humans.
  • Compliance and regulation. Humans can be in charge of the compliance of technology and process with the current regulations and laws, changing them when needed.
  • Ethical considerations. Humans can oversee ethical considerations with regard to KYC digital technology and make sure that it is used responsibly, intervening when necessary.

Digital KYC technology can automate manual processes and improve compliance screening efficiency and accuracy, but it will not likely replace the role of humans completely. On the contrary, eKYC technology will likely make the work of financial crime compliance workers more efficient and streamline processes, resulting in better customer experiences, and lowered financial crime risk to institutions around the globe.

Don’t Fear AI—Leverage It

I’m sure if I had more than the minute it took for ChatGPT to spit out that response to the second question, I could have come up with something similar, but the point goes to AI today.

Technology as a whole has the potential to disrupt, evolve, and drive real change in the financial compliance industry, but it will still require the smart, curious, and comprehensively-minded professionals that make up the ranks of the financial crime compliance community to take advantage of technologies like eKYC.

We now have to bring a revolutionary toolset to the fight and change the math when it comes to our ongoing battle against the dark underworld of illicit finance and corruption. Is this the silver bullet that solves everything? Absolutely not—nor should it be. Human behavior is complex, to say the least, with most of us spending our lives trying to process and react to it in real-time. An AI will never be as good as the “real thing” in that sense, but it also does not negate the value tools like digital KYC verification can bring to the table. The opportunity lies in our ability to harness its capabilities and deploy it to the right areas of financial compliance (and beyond) to let us humans work on what we’re best at: comprehensive challenges.

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Joe McNamara
Marketing Director
Joe is a senior marketing professional strategically aligning company growth initiatives with target audiences and clients. With more than 12 years of experience, he is well versed in building brands, structuring and running campaigns, and scaling teams in both marketing and sales.