As third-party payment processors (TPPPs) face ever increasing transaction volumes, they also face increasing pressures to detect and prevent financial crime. Moreover, the criminals’ tactics are becoming more sophisticated and well-practiced.
Douglas Blakey speaks with David Caruso of WorkFusion
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TPPPs are prime targets for financial criminals due to the speed, anonymity, and limited oversight they offer.
Payment processors pose a great money laundering risk without a clear and effective way to verify their merchant clients’ identities. The risk is even greater when the TPPP does not perform adequate due diligence on the merchants that are originating payments.
Traditional compliance methods — plagued by high false-positive rates and slow manual reviews — struggle to keep up with evolving threats.
The Federal Financial Institutions Examination Council has warned: “Payment processors pose greater money laundering and fraud risk if they do not have an effective means of verifying their merchant clients’ identities and business practices. Risk increases when the processor does not perform adequate due diligence on the merchants for which they are originating payments.”
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By GlobalDataWorkFusion: Agentic AI agents already in action at 4 of the top 5 US banks
David Caruso, VP Financial Crime Compliance at WorkFusion, tells EPI that is there Agentic AI comes in.
“We make compliance stronger, and we do that while reducing expenses.” That last line is a great soundbite as is the line that its agentic AI solutions are already being deployed by four of the five largest US banks.
AI Agents can automate complex workflows and enhance human efforts to detect financial crime like money laundering with greater speed and accuracy.
In short, WorkFusion automates the redundant manual work done by level 1 analysts, that is often plagued by errors and a lack of consistency.
“Why we are in business and why our clients use us is because of these high volumes of transactions. There are often high volumes of alerts and until recently, these had to be reviewed by human beings. And when you combine those factors, high volumes and high numbers of alerts, it creates all sorts of additional problems such as work backlogs, which then increases risk.
“If there’s too much work, humans can’t do it. You get delays. Things slip through the cracks. Human beings can’t maintain the pace they need to maintain. They can’t maintain the quality they need to maintain. So, what WorkFusion does is use AI agents to perform much of that work. We both automate the gathering of information, and then we also apply reasoning and analysis on top of that.”
“AI agentic agents simply aren’t as expensive as an army of people.”
The AI agents are programmed to undertake AML and sanctions compliance work following prescribed steps in every instance. Caruso says that humans don’t always follow all of the prescribed steps for all sorts of reasons. Some well-meaning and some just because they get distracted. In addition, the technology provides a record of why a decision was made; again this is something that is very time consuming for humans. He says that on occasions, human beings maybe do not document their decisions exactly the way that the regulators require. In addition, the machines can do it at a speed that people just can’t keep up with and so that avoids any potential backlogs.
And then there is the cost angle.
Why TPPs are attractive to criminals
Caruso says that TPPs do not by definition, necessarily present a greater or higher risk but there are certain unique characteristics that may make them more attractive to certain types of criminals.
For example, a payment processor doesn’t have the type of relationship with the person that is initiating the transaction in the same way that a bank will have with one of its checking account customers. There is then, a degree of separation; you have the processor, the merchant, and then you’ve got the end user.
“There is them the issue that most transactions are legitimate. They are lawful and honest. So, how do you filter the potentially suspicious from the non-suspicious?
There are issues such as synthetic identification fraud, which unfortunately the industry is susceptible to. Here you have the interesting scenario of the criminals themselves using advanced technology like AI. History has shown that criminals always tend to be ahead of the industry’s use of any new technology.”
‘This is never ending’
Looking ahead, Caruso is more glass half full than half empty. It is, he says, incumbent on all stakeholders in the ecosystem to keep pace with the criminals,
Whether you are a regulated financial institution, a payment processor or, say a casino, everyone should try to keep pace. I mean, this is never ending. Whether you’re a regulated financial institution, a payment processor or, say a casino, we have to try to keep pace. It would be fair to say that the payment processors are technology companies in and of themselves. I think that that’s an important element.
They understand the power of technology, where sometimes traditional financial institutions do not and struggle in those areas. So, I think in that regard, payment processors are well positioned. Obviously, there is a lot of new technology that they can avail themselves of, AI in particular, so there is plenty cause for optimism.”
