Telcos: Constructive Financial solutions for AML Challenges

Here is why telecom operators are best suited to provide AML compliance solutions

Globally, the telecom service providers are under massive pressure to add new revenue streams because of the commoditization of voice and data services and dropping margins. In this regard, several service providers have started offering financial services to leverage their distributor network and existing relationship with the subscribers.

While in some geographies, the service providers have just started to offer financial services, in other regions, they are going beyond providing basic mobile payments solutions and are now transitioning to consumer financial services like wealth management, payment wallet, loans, insurance and savings, among others.

Regulatory Compliance requirements in the financial sector

While providing new financial services is helping them grow their revenue and enhance engagement with their subscribers, service providers face several challenges in providing financial services to their subscribers. First, they have to ensure due diligence with rigorous compliance and regulatory requirements. This is crucial considering service providers are the customer-facing organization and are the first avenue of any complaint even when it concerns the banks and financial institutions.

Further, there is enormous pressure on the service providers to ensure that their infrastructure is not used for malicious purposes or to conduct a cyberattack. It can lead to loss of reputation, brand value and even subscribers. According to Fenergo, a research firm, $10 billion in anti-money laundering fines were issued to financial institutions in 2020.

What further adds to the pressure is that there has been a massive increase in financial crimes over the last few years. The criminals are targeting the financial platforms because the digital nature of platforms makes it easier to remain anonymous while allowing them to quickly conduct the fraud.

Financial services offered by the telecom service providers are particularly vulnerable because of a wider canvass and several fronts, including the customers, employees and agents, from where the attack can originate.

While there are several types of cybercrimes, such as roaming fraud, identity fraud, and foreign exchange fraud, possibly the most severe type of financial services fraud is the use of the platform for money laundering and financing terrorism. Typically, a loss from money laundering and financing terrorism-related incidents is much more significant and negatively impacts the service provider’s reputation, preventing potential new customers from joining the network.

Variable Thresholds using Artificial Intelligence 

There is a need to set up a dynamic screening and monitoring mechanism that can identify suspicious customers in real-time and report them to the concerned authorities, who can then quickly respond to mitigate the damage. Further, the technology should be able to ensure compliance with strict and demanding regulatory rules.

Artificial Intelligence (AI) and Machine Learning (ML)-based digital tools are empowering the service providers in effectively identifying, assessing and managing money laundering and terrorist financing risks. Right from real-time data collection, processing and analysis, the technology solutions reveal money laundering and terrorist financing threats in just a few seconds. These can then be validated from a global database of Politically Exposed Person (PEP) and other sanction lists to ensure secure Screening during the time of customer onboarding itself through continuous Monitoring till the customer is in the operators network

The telecom service providers offering or planning to provide financial services need to deploy AI-based technology solutions to regularly monitor the systems to protect themselves from hefty and avoidable penalties and provide a secure system to their subscribers. This is also crucial considering that telecom infrastructure is extensively being used for fraud. According to David Morrow, expert fraud consultant, telecom crime is worth around $38 billion every year, making it imperative for the industry to enhance its security and AML and CTF measures.

To this end, it is crucial to associate with a partner, like IDcentral, part of Subex, which comes with proven expertise in helping CSP’s protect their systems. IDcentral’s solution comes with several features including screening with an automated customer monitoring against the global watchlist, PEP and adverse media and highlighting any suspicious activity during initial onboarding as part of KYC, among others, to enable service providers to make a more informed decision. The solution ensures compliance with the recommendations of the Financial Action Task Force (FATF), globally recognized as AML and CTF standards. Further, IDcentral’s solution comes with a deep understanding of telco systems and years of experience in supporting global service providers to protect their infrastructure.

Find out more about how IDcentral’s solution empowers service providers to grow their revenue by offering financial services by addressing the security risks and without compromising their infrastructure. 

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