By: Tyler Picach, director of global financial services at Microsoft; John Weigelt, National Technology Director, Microsoft Canada; and Tracy Lagasse, Business Advisor, Microsoft Canada.
Financial services firms have long recognized that technology is a transformative force in their business models. Now they’re using new advances in artificial intelligence and data science to take a tough crack at some of the world’s worst crimes.
cheater Microsoft Cloud for Financial Services, our clients manage financial services data at scale and build solutions that improve customer experiences and operational efficiencies. With the advent of generative AI capabilities Azure OpenAI ServiceBusinesses can now unlock new value from their data and not only drive better customer outcomes, but also improve their defenses against a wide range of financial crimes, including fraud, electronic crime and money laundering.
The financial costs and scale of these crimes are staggering. Globally, the total amount of money demonetized in a year is at least two percent of global GDP, or $800 billion.1 For financial services firms, the cost of financial crime compliance will reach $213.9 trillion by 2021.2: USD 56.7 billion by 2022 in Canada and US alone,3 A 13.6% increase from 2021.
Until recently, financial services firms felt limited in their ability to combat the worst types of crime. A cat-and-mouse game with nefarious actors who use a variety of financial instruments in sophisticated ways, exploiting the distributed nature of the financial system to commit their crimes. For example, criminals may engage in small transactions at different institutions or hide their activities in different accounts at the same financial institution.
Protect privacy while improving security
A universal approach to digital privacy is a cornerstone of trust, human rights and personal empowerment in an increasingly interconnected world. Privacy is mandated by laws around the world such as Canada’s Digital Charter Implementation Act 2022 and the European Union’s General Data Protection Regulation. Of course, banks and other financial services firms also know that if their data is leaked or compromised, customers will vote with their feet.
At its core, privacy is the protection of personal information. This presents some challenges in the fight against financial crime, as it prevents organizations from piecing together a complete picture of what an individual bad actor or group of bad actors might do. All keys are stored in transaction records, account information, customer relationship databases, etc. But they are limited when associated with personally identifiable information.
Fortunately, companies can now attack the problem by using innovative technologies such as stealth computing and artificial intelligence, which allow various parties to safely extract information from financial data without violating privacy requirements.
Confidential Computing and De-Identification: New Layers of Security
Modern cloud-based methods and capabilities enable this transformation. On the one hand, data can be better protected in the cloud Azure Confidential Computing. This unique service encrypts data as it is processed, meaning that data is no longer protected just at rest and in transit, but in use. While it is in memory, it cannot be accessed by cloud operators, malicious administrators, or privileged software such as the hypervisor.
The belief in Azure Confidential Computing is rooted in independent hardware. Even Microsoft operators cannot access the encryption keys. This enables government customers to independently cryptographically verify the identity and “good health” of the cloud operating environment they trust.
At the same time, regulators are beginning to recognize the impact of new identification techniques that obfuscate or remove personally identifiable information from data sets. Data masking, data tampering, and differential privacy are some of the powerful identification tools and methods that have begun to prove effective in making data available to AI to provide critical insights without compromising privacy.
Financial services firms can now work across enterprise data sets, reasoning about data not just from one location, but from different locations and from different organizations, while preserving the benefits of strong privacy protections. This significantly changes the way an organization handles data. Swift is a recent example. from a financial services firm that benefited from these findings in developing an anomaly detection model for transaction data without copying or moving data from secure locations. AI and related tools and technologies can now explore, analyze and discover trends and insights that can not only help their business but also have a positive social impact.
How AI Can Help Financial Services Firms
With AI, financial services firms have new capabilities for risk assessment and scoring that can help prioritize investigations and resources. They can also benefit from pattern recognition to detect anomalies and suspicious activity in large volumes of financial transactions, customer data and other sources. This has significant implications for fraud management, which financial services firms rely on to mitigate their risks. If a company shows new positions, underwriting costs can be reduced.
Additionally, generative AI can be used to analyze vast amounts of unstructured data from various internal repositories for indicators of suspicious activity. Natural language processing can assist in the provision of regulatory documents, legal documents and compliance reports. Financial institutions can gain comprehensive organizational benefits by integrating productivity applications. At Microsoft, our goal is to democratize AI and make these tools accessible and available not just to data scientists and mathematicians, but to people across the enterprise. This is reflected in extensive innovations Announced in Microsoft Build 2023, We’ve integrated AI into Azure, Microsoft 365, our developer tools, and more. These AI-powered products enable more actionable insights for better decision-making and greater efficiency across the organization.
The art of what is possible
In our work with clients, we see interest in exploring the potential of these powerful new tools to combat fraud, money laundering and other forms of financial crime. In Canada, privacy-enhancing capabilities have been enhanced by long-term stabilization. Ontario Information and Privacy Commissioner De-identification is a legitimate and valuable way to protect information, and companies have guidance on how to proceed. It is a powerful affirmation that as companies explore new opportunities, they can take advantage of new approaches to address privacy considerations. Once we illuminate the art of the possible, the conversation changes quickly and we can work collaboratively to solve these difficult challenges.
Fight financial crime with the Microsoft Cloud
Collaboration is key to industry-wide progress in the fight against all forms of crime and financial fraud. Working together is a core Microsoft value, and it’s more than just making sure our products and tools are integrated. We recognize that these challenges are bigger than us or any company, organization or institution. Therefore, we encourage and support the roles played by each player in the ecosystem, from industry partners to government officials, regulators, law enforcement agencies and of course customers.
For financial services firms looking to explore these new possibilities, an exploratory engagement or proof of concept is a great way to explore how the technology and process puzzle pieces fit together. We’re constantly amazed by the innovative and impactful ways customers use these tools to improve their organizations and the world.
Learn more in a recent post on how Microsoft Cloud Helps Banks Manage Risk and detect Real-world customer examples and other resources How Microsoft and our global partners can help banks deepen risk insights, facilitate regulatory compliance and fight financial crime.
124 alarming money laundering statistics [Nuevos datos 2022 e infografía]BusinessDIT.
2Global Financial Crime Costs to Financial Institutions Reach $213.9 Billion, Finextra.
