The reputational and financial growth of your business will, above all else, be influenced by the way your teams use the internal tools at their disposal. From the utilization of quality anti-fraud AI-based applications to leveraging financial risk-assessment software, the long-term stability of your firm will be directly related to the programs used to verify the financial operations necessary for your activity. The ultimate goal of these software tools is for your business to avoid being affected by external attacks, continue its monetary expansion at an accelerated pace, and achieve payment compliance.

Payment regulations adherence is crucial for business activity, as depending on the domain in which you are present, your activity might come under the supervision of international regulatory organizations. Are you, for example, the manager of a private financial entity, working with national or interstate clients? Then, the use of AML and KYC tools will be necessary to respect the regulations of FinCEN or the European Supervisory Authorities. Have the regulatory commissions concluded that you have not ensured the privacy of customers’ financial data? Then, you could face severe fines, seriously affecting the trimestral profits of your venture.

What Does Compliance with Payment Regulations Entail?

Regulatory payment compliance refers to the nationally or internationally relevant regulatory and industry frameworks that must be complied with by companies that carry out financial transactions and manage complex transactional data. Payment regulatory adherence is a way for firms to demonstrate that they are operating legally, prioritizing the security of customer financial data while implementing methods to mitigate the effectiveness of money laundering, fraud, and other external financial attacks. The payment regulations vary by region. However, by and large, these regulations typically include five subsequent aspects.

For starters, nationally or internationally active ventures must be aware of anti-money laundering regulations, which are designed to prevent the usage of the private or national monetary systems for the financing of fraudulent or illicit activities. In the US, AML regulations are overseen by the Financial Crimes Enforcement Network, which can impose penalties of $1 million per financial infraction. For example, the operator of BTC-E was fined $100 million in 2017 for the willful violation of U.S AML stipulations.

In the EU, AML regulations are enforced by the ECB, EBA, and the national financial regulators for each EU member state. Moreover, in Europe, AML fines are usually lower than in the US. Still, they can, according to the AMLD5 Directive, reach up to €5 million or 10% of the institution’s turnover for the previous fiscal year. On top of respecting International AML regulation, payment compliance will also encompass following the GDRP and EETA regulations, the PS2D directive, and the Payment Card Industry Data Security Standard ( https://www.itgovernance.eu/en-ie/what-is-the-pci-dss-ie ), which is crucial for all businesses that manage credit card transactions, regardless of size or industry.

What Are the Benefits of Using AI-based Anti-Fraud Solutions?

The AI revolution impacted significantly the way in which AI-based AML and KYC applications prevent businesses from dealing with external monetary fraud. AI algorithms can analyze an impressive volume of data in real time and detect patterns or anomalies in the collected information, which a traditional non-AI anti-financial fraud solution may miss. The accuracy of AI-based fraud-prevention applications is much greater than is the case with conventional tools, and the algorithms used by them are constantly improved through machine learning, which makes AI tools the only viable way to keep up with external threats modifications.

Plus, such programs are scalable, suitable for ventures that handle multiple data streams simultaneously, have a much better false positive rate than traditional applications, and are more cost-effective in the long term. AI-based fraud detection and AML compliance applications can generate automated reports for flagged suspicious transactions, be integrated with the rest of the third-party tools utilized by your employees, and use neural nets to change their capabilities in relation to the quality and data volume they have access to.

How Will Such a Tool Work?

The first step in achieving payment compliance should be to use an AI-based fraud detection software that will leverage advanced machine learning, NLPs, CNNs, and real-time data monitoring to prevent fraudulent financial activities before they can affect the activity of your venture. How will such a tool work?  Let’s assume you are a company that sells products on the Internet, and one of your customers wants to make a purchase. Once the transaction is initiated, the fraud detection application will collect the client’s credit card and personal information, note the utilized device’s IP address, and look for patterns in past transactional data.

The informational data collected during the transaction initialization process will be limited. So, the fraud detection application will enrich this data with the help of external databases. For example, did the IP of the customer appear in an online spam repository? Then, that might be a red flag that needs further investigation. The utilized tool will use complex algorithms to spot patterns in the recorded data, provide a risk score for the transactions, and leverage machine learning models to perform unsupervised approval or decline of the operation based on the previously identified information. Is the transaction flagged? If so, the customer may be asked to prove his identity or use another authentication method before the payment is processed.

A Necessity for National-Level Corporations

Not achieving payment regulatory compliance can lead to significant long-term financial losses and judiciary settlements, which are likely to affect the productivity of your workers. Not least, you must also consider the impact that a payment regulator adherence policy will have on your venture’s reputation. Failing to respect the AML and KCY legislation relevant to your venture’s domain could tarnish your reputation, decrease brand deals, affect customer retention, and lead to increased scrutiny from regulatory bodies and external fraudsters.

Do you want your private entity to develop predictably and sustainably, regardless of market conditions? In that case, your priority should be achieving payment compliance. Using an AI-based fraud detection application can be the most cost-effective way to ensure that your venture complies with the payment regulatory framework active in your industry. Using fraud detection software with AI capabilities will minimize business disruptions, reduce the overall operational costs of your activities, and enhance the trust that customers put in your services. AI is the best way to prevent fraud, keep up with AML, PCI DSS, or EFTA regulations, and ensure the continuous and predictable growth of your organization.