HSBC is using software from fintech startup Quantexa to help it automate the fight against money laundering.
This follows a pilot of the software by the bank in 2017.
The software will analyse billions of data records including internal and external sources to spot potential money-laundering activity. This will help HSBC meet regulatory compliance and reduce risk for its business.
Banks have a vested interest in ensuring they stay compliant with the regulations in place for catching and reporting money laundering.
In May 2017, Citigroup agreed to pay almost $100m and admitted to criminal violations as it settled an investigation into breaches of anti-money laundering rules involving money transfers between the US and Mexico. In the same year, Deutsche bank was fined $650m by British and US authorities for allowing wealthy clients to move $10bn out of Russia. According to the UN, $2tn is moved illegally each year.
In February 2017, HSBC revealed it was being investigated by the Financial Conduct Authority (FCA) for failings around money-laundering controls. In its 2016 financial results, the bank said it is “the subject of an investigation by the FCA into its compliance with UK money-laundering regulations and financial crime systems and controls requirements”.
Monitoring ever-increasing levels of customer and transaction data has become a hugely mathematical and complex task, but HSBC hopes to combat that by integrating Quantexa’s open source software – which uses artificial intelligence – in its systems in 2018.
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“We are continuously looking for ways to build on our existing capabilities to detect and prevent financial crime,” said HSBC global risk chief operating officer Ray O’Brien. “Following our investment in Quantexa, we are looking forward to working closely with the company to use its technologies as we become more intelligence-led in our approach to financial crime risk management.”
Banks are increasingly working with small IT suppliers as the fintech sector matures. While fintechs offering customer-facing services such as mobile apps are better known, banks are investing in key technologies in the background that help them to reduce costs and improve operations.