With each passing year it is evident that the realm of financial crime is continuously growing in stealth and intricacy. With scammers and fraudsters constantly adapting their methods, exploiting the latest online platforms to launder illicit funds and deceive unsuspecting victims, the need for an agile and robust anti–money laundering measures has never been more urgent. Banking institutions, recognising the escalating threat, are turning to advanced technologies such as Artificial Intelligence and Machine Learning to bolster their defences and protect their customers.

In Malta, Bank of Valletta has proudly been at the forefront of the fight against financial crime. Last year, the bank unveiled plans for a pilot project, partnering with US, London and Prague-based Resistant AI to implement a tailored Anti–Money Laundering (AML) solution, aligning with evolving regulatory standards. This advanced AI system features impressive capabilities and can detect transactions suspected of financial crime including that of money laundering and fraud, while also flagging any unusual or suspicious activity for further investigation. Promising unparalleled transaction coverage, the system provides BOV with a comprehensive view of activities across all customer accounts, enhancing its ability to monitor potential illegal activities and safeguard the integrity of its operations.

Following a year-long integration phase, BOV has now completed the full implementation of its AI-powered monitoring tool. For Ryan Caruana, the bank’s Group Chief Anti–Financial Crime Officer & MLRO, this transition marks a significant journey of learning and adaptation for the bank.

Ryan Caruana

“It’s important to note that this pre-transaction monitoring AI system is not an off-the-shelf product, but tailored also for the bank’s expectations. After thorough market research, we chose to partner with Resistant AI utilising their Transaction Forensics product. Over the past year, we've customised the system to fit BOV's unique offerings and our diverse customer base, which currently stands over 340,000 active clients. This process has allowed us to fine-tune the system, feed it data related to common transaction patterns relating to our customers, and ensure seamless integration without disrupting our core operations,” elaborates Mr Caruana, who has an extensive background working in AML and financial crime investigations with previous experiences both locally and overseas.   

In practice, the AI monitoring system operates in real-time, enhancing the bank's defences against financial crime while aligning with evolving regulations and internal risk evaluations. Capable of swiftly processing vast quantities of real-time data, it identifies patterns and irregularities that signal potential unlawful activity.

“One standout aspect of this system is its ability to grasp diverse contexts. For instance, it's smart enough to understand transactional patterns based on customer behaviours,” Mr Caruana explains, going on to highlight that the bank’s team of experts then categorises all alerts depending on their magnitude and complexity. Subsequently, they collaborate with relevant authorities to combat financial crimes effectively.

Speaking about the ever-evolving nature of financial crime, Mr Caruana highlights how offences can vary widely, from irregular cash deposits to severe cases like the money laundering of sexploitation, and fraud. Utilising the AI system, the bank identifies payment patterns indicative of specific crimes. These insights, coupled with various best practice guidance documents, such as FIAU United Nations and other relevant bodies locally and internationally, are used to keep on enhancing the system further, enabling it to adapt to emerging trends holistically. Consequently, the system applies these measures across transactions and may even implement hard-stops to curb high-risk activities, ensuring the bank is able to address evolving threats with agility.

In addition to deploying the AI system, BOV has also intensified its Know Your Customer (KYC) duties. This involves a meticulous process of ensuring customer profiles remain current and relevant, covering various criteria including that of account purpose and nature, among many other factors. These efforts align with the expectations and obligations of various regulations and the AML framework in general. Reflecting on the challenges of implementing more rigorous KYC measures, Mr Caruana shares, “Initially, some customers were sceptical about why the bank needed to ask so many questions. However, increasingly customers understand that this is standard practice, not just in Malta but worldwide. Banks have a duty to ask relevant questions to maintain accountability as per their account activities. That said, at BOV, we also recognise the need to continuously refine our approach. If we find that certain lines of inquiry are of no value or not based on a risk-based approach, we will have to adjust our strategy. It's about striking the right balance between customer experience and ensuring accurate KYC data. Our aim is to ask the right questions where they truly matter. It's an ongoing process.”

As Malta’s leading bank, BOV isn't just satisfied with setting industry standards for anti-money laundering practices but is also committed to fostering dialogue and sharing insights with other financial institutions. Mr Caruana himself regularly participates in various local and international fora. Through these experiences, he has noted a changing perception of Malta within the global financial industry, a testament to the country's efforts in combating financial crime.

“While always remaining prudent, it's positive to note various comments on Malta's growing reputation as a trustworthy jurisdiction once more. However, we mustn't become complacent. Financial crime is always evolving, demanding our constant attention. As such, learning and adapting are crucial, and by also referring to lessons learnt , we can better prepare ourselves for potential challenges down the line, because the challenges being faced by other countries are inevitably going to affect Malta too. So, we can take valuable lessons from the wider banking community to be better equipped to handle emerging trends.”

Now backed with an innovative AI system, Mr Caruana is confident that BOV can stay ahead of the curve, especially in light of new and upcoming regulations and directives such as the EU Anti Money Laundering Authority and the AML reform package placing increased expectations on banks and financial institutions worldwide.

Despite these developments, Mr Caruana is keen to highlight that, in many ways, this is all business as usual for BOV. More than ever before, Mr Caruana highlights the responsibility of the bank to keep its customers educated about potential threats they may unsuspectingly face daily. 

“As a bank, we continuously emphasise that when dealing with anything financially related online, it’s important to verify all information from recipient details to email addresses and links, and any requests for unusual payments from unknown entities. While we work hard to prevent fraud and scams, recovering lost funds in such cases is extremely difficult. So, it's essential for people to remain alert and recognise warning signs. When unsure, it’s advisable to reach out to customer support for assistance,” he concludes.

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Photos by Danielstudiomalta.com

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