The role of artificial intelligence in enhancing AML and regulatory compliance in fintech

The fintech sector is evolving rapidly, transforming financial transactions, but it is also facing growing regulatory scrutiny and risks, such as fraud and cybersecurity threats.

As director/MLRO of SENDS, a UK-licensed EMI, I see AI’s potential in fraud prevention, AML, and compliance. Sends leverages AI to mitigate risks, comply with FCA, PSD2, and PCI DSS, and enhance client experience with secure and innovative services.

At SENDS, we integrate AI-powered compliance tools to streamline KYC and AML, improving efficiency, accuracy, and speed. Strict compliance with FCA, PSD2, and PCI DSS protects consumers and combats financial crime, but implementation demands resources and adaptation. Traditional compliance methods struggle against rising cyber threats, fraud, and money laundering, necessitating advanced solutions, such as human-driven transaction reviews and static rule-based systems.

Traditional methods are increasingly inadequate in today’s fast-paced digital world:

• Time-consuming: Manual reviews delay transactions and onboarding.
• Susceptibility to errors: Human mistakes can overlook fraud or misreport compliance.
• Reactive, not proactive: Rule-based systems fail to detect evolving threats.

At SENDS, we recognised early that outdated practices compromise security and efficiency, so we embraced AI-driven solutions to transform fraud detection and compliance. AI-powered tools analyse vast data sets in real-time, detecting emerging fraud patterns through machine learning (ML) for improved accuracy.

Key benefits of AI in anti-fraud:

Machine learning for pattern recognition: Detects irregularities like sudden transaction spikes, turnover fluctuations, or unusual geographic activity.

Behavioural analytics: Tracks login habits, device use, and transaction timing to flag anomalies, such as rapid transaction speeds.

Reduction in false positives: AI reduces unnecessary alerts by applying predictive analytics and contextual understanding.

At Sends, we have implemented AI-driven fraud detection capabilities, allowing us to monitor real-time transactions. These systems enhance our security framework and ensure smooth, uninterrupted customer service.

AML compliance requires risk assessment, transaction monitoring, and reporting suspicious activity. Traditional methods struggle against evolving financial crimes, but AI enhances efficiency, accuracy, and compliance.

Key features of AI-enhanced AML compliance:

• Automated identity verification: AI streamlines identity verification with facial recognition, document checks, and liveness detection, reducing onboarding time while ensuring compliance.
• Risk-based monitoring: Assigns dynamic risk scores based on behaviour and context, prioritising high-risk cases.
• Automated Suspicious Activity Reporting: Generates timely, accurate reports to maintain Sends compliance.

By integrating  AI-powered compliance solutions, Sends has achieved an efficient onboarding process that combines accuracy, speed, and regulatory compliance. This has been instrumental in maintaining customer trust while meeting legal expectations. However, implementing such measures is resource-intensive and requires continuous adaptation to emerging threats and regulatory changes. When developing innovative solutions, my team and I take a strategic approach, carefully assessing potential future risks and proactively implementing measures to mitigate them.

Regulatory complexity grows with multinational transactions, where non-compliance risks fines or reputational damage. AI automates compliance tasks like data collection, report generation, and regulatory submissions. At SENDS, we use AI in our PCI DSS framework to detect vulnerabilities and prevent payment fraud, ensuring secure transactions.

Our AI-driven fraud prevention includes encryption monitoring and threat detection, making transactions fast and secure.

While AI offers undeniable advantages, compliance implementation must be carefully managed to prevent unintended consequences.

One challenge lies in potential biases within AI models. If such tools are built on inadequate or skewed data sets, they may lead to unfair outcomes, such as disproportionately rejecting transactions from specific demographics. We routinely audit our AI systems at Sends to ensure ethical usage and proper functionality. Before launching a new solution, each tool undergoes thorough testing by a team of testers and a compliance team to verify that it operates correctly and aligns with its intended purpose. Another concern is over-reliance on AI systems. While automation significantly reduces labour-intensive tasks, human insight remains invaluable for decision-making and addressing nuanced cases. At Sends, our compliance officers work alongside AI tools to provide a balanced, thorough approach to regulatory challenges.

At Sends, AI enables us to monitor risks in real-time, deliver faster verification processes, and uphold the highest security standards for financial transactions. However, the true power of AI lies not just in automation but also in its ability to evolve alongside the threats it combats.

Financial institutions must adopt a strategic, ethical, and collaborative approach to succeed in this dynamic environment. By combining advanced technology with human oversight, Sends is poised to continue leading the charge in safe, compliant, and efficient financial services. AI will play an even greater role in protecting the global financial ecosystem while fostering innovation and growth in the fintech sector.

Looking ahead, the message is clear: Trust in technology but uphold ethical responsibility and regulatory alignment to thrive in a tech-driven world. Only then can fintech companies thrive in a world shaped by technological progress.