Yahoo Finance Moody's building AI model for compliance checks
Moody's is building an artificial intelligence (AI) model for upgrading its compliance risk and know-your-customer (KYC) checks.
On this week's episode of Yahoo Finance's The Crypto Mile, Moody's Analytics general manager for KYC Keith Berry explained how the risk assessment company is utilising AI to enhance its tools in combating illicit finance and addressing the expanding list of economic sanctions.
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"We have some of the biggest data sets in the world on sanctioned individuals, on sanctioned companies, and on politically exposed people," Berry told Yahoo Finance UK.
He added that Moody's (MCO) has brought this vast data set together with an AI model that "flags high-risk cases for a human to then investigate further".
This AI model has been trained with more than 12 million decisions from human analysts. It has learned from the decisions that these analysts have made to help reduce incidents of false positives and make identifying risk more efficient. The Moody's Analytics manager envisions the AI model as providing an 80% improvement in efficiency compared to current processes.
Surge in economic sanctions amid Ukraine war
Berry explained the complexity that has arisen for risk assessors due to the global expansion of sanctions following the Russian invasion of Ukraine.
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"The sanctions regime is very complicated now, and it has expanded massively since the start of Russia's war with Ukraine. There are around 67,000 sanctions on lists, and that is growing at around 30 per day on average," Berry said.
He also outlined the complexity of the current compliance process, stating that there could be thousands of companies owned by each sanctioned individual.
"This is where we often see things like shell companies coming into play where people are trying to hide their ownership, or make it very difficult to understand how much they own of a particular company," he added.
Moody's analytics utilises perpetual KYC
Berry outlined a novel approach for maintaining precise customer and counterparty records using an automated, AI-enhanced monitoring service operating in real-time, known as perpetual KYC.
"We have a database that has over 470 million companies in it, with all their directors and owners. It also contains 1.7 billion ownership links. So it is being able to apply AI to understand that kind of network of ownership and be able to calculate the ownership, and do it perpetually," he said.
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He told Yahoo Finance UK that, historically, KYC reviews happened every one, three, and five years in the industry. "However, obviously a sanction can come out tomorrow and you can be fined for doing business with that sanctioned entity.
"So the world is quickly evolving to need what we call perpetual KYC. Which is looking at all the data in real-time. So if there is a change on a sanctions list, we publish that change within 24 hours of it becoming official," Berry added.
He also explained how AI and data science is being used to update customer workflows in real-time to keep up with the ever-growing list of sanctioned individuals. "Customers get alerted if they need to look into a customer who has changed from low risk to high risk."
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