Know your customer, know the risks: How Kai can help

In the realm of fraud prevention, Know Your Customer (KYC) processes are an essential first line of defence, verifying identities while flagging suspicious activities. Yet, with fraudsters employing increasingly sophisticated tactics – such as synthetic identities and cross-border money laundering – traditional KYC measures are struggling to keep pace.

For Jo Whalley, Director at bigspark, the benefits of KYC are well known. “KYC processes play a critical role in combating fraud,” she says. “Verifying identities and identifying subtle inconsistencies in documents can act as an early warning system for detecting fraudulent intent. But KYC doesn’t stop at onboarding; it’s also about ongoing due diligence – monitoring unusual transactions and relationships over time.”

This sentiment is echoed by Arshad Rahman, Head of Compliance and Financial Crime at Katanox. “KYC processes gather critical identity data at onboarding and enable the ongoing monitoring of transactions,” he says. “By cross-checking data against known patterns of fraud, these systems act as a vital safeguard, particularly as fraud tactics evolve.”

Guy Parker, Associate Partner, Capital Markets and Financial Crime Transformation at IBM Consulting, since 2009 – the views in this article are his own – highlights another critical aspect. “The key benefit of effective KYC on a bank’s fraud controls is its ability to identify mule accounts,” he says. “Used to funnel fraudulently obtained funds, these form the backbone of many schemes. If banks could effectively identify mule accounts, the need for fraud transaction screening would significantly diminish.”

How Kai transforms KYC

Recognising the challenges facing the sector, bigspark has launched Kai, its all-new KYC AI investigator, designed to enhance how organisations detect and prevent fraud while ensuring compliance with global regulations. For example, by consolidating information from multiple sources – including transactional records, relational data, and third-party verification tools – Kai creates a comprehensive profile for each customer. “Kai gives organisations a unified view of their customers,” says bigspark’s Jo Whalley. “This holistic approach makes it easier to spot unusual connections or behaviours that could indicate fraud. Built with advanced AI algorithms, it offers features that address the limitations of manual and outdated KYC systems.” Katanox’s Arshad Rahman recommends that organisations take extra steps where possible to enhance their KYC processes. “As fraud becomes more intricate, organisations need a unified view of their customer data,” he says. “Combining transactional history and third-party information gives businesses the power to identify suspicious activity and relationships across systems.”
Understanding customer behaviour and relationships is vital for effective fraud prevention. Profiling customers and undertaking peer-group anomaly detection allows organisations to identify patterns that may indicate fraudulent activity or even potential victimisation,” explains IBM’s Guy Parker. “Historical transaction data, combined with relational insights, is invaluable for this purpose.

Efficiency through automation

AI’s integration into KYC processes has ushered in transformative changes. “AI supports real-time analysis and insights, such as entity resolution and network analytics, enabling more nuanced, risk-based decisions compared to traditional methods,” IBM’s Guy Parker observes. This can mean the automation of repetitive KYC tasks, such as document verification and transaction monitoring, which not only reduces costs but improves accuracy and frees human analysts to focus on higher-value work. “By automating processes, organisations can allocate resources to more strategic activities,” says Katanox’s Arshad Rahman. “Automation enhances efficiency by reducing manual intervention in routine tasks, which allows teams to focus on more complex investigations and decision-making.”
Kai can take the strain of everyday tasks, with its automation capabilities minimising the risk of human error and using its anomaly detection algorithms to spot deviations from expected behaviours. “It might be discrepancies in documentation or identifying dormant accounts initiating high-value transactions,” says bigspark’s Jo Whalley. “AI excels where manual methods falter.”

Supporting regulatory compliance

As global regulations on fraud prevention and data security become stricter, Kai provides organisations with the tools to meet these demands effectively. “Kai’s transparency features make it easy to explain its decisions to regulators,” bigspark’s Joanne Whalley continues. “It provides a clear audit trail for every action, ensuring accountability.”
This compliance-ready approach is particularly valuable for businesses operating in multiple jurisdictions, where regulatory requirements can vary significantly. “As regulatory scrutiny intensifies, businesses must ensure that their fraud prevention processes can be audited and explained,” adds Katanox’s Arshad Rahman.
Collaboration as defence Combating fraud should not happen in isolation, with organisations benefitting from a collaborative approach when it comes to KYC. “Using anonymised data to identify trends across sectors strengthens the collective fight against fraud,” says IBM’s Guy Parker. “This cooperation is essential in an interconnected world.”
Financial institutions can share anonymised data on flagged transactions, identifying trends and connections that would be impossible to detect in isolation. “Fighting fraud requires cooperation across sectors,” Katanox’s Arshad Rahman believes. “The more data organisations can securely share, the better the chance of identifying coordinated fraud.”

The future of AI in KYC

As fraud tactics evolve, so too must the tools used to combat them. bigspark’s Jo Whalley predicts advancements in biometric verification and real-time behavioural analysis over the next three to five years. “Technologies like liveness detection will help distinguish genuine users from deepfakes or spoofing attempts,” she says. “But these innovations must be integrated into existing systems ethically and seamlessly.”

IBM’s Guy Parker agrees, citing AI as the solution. “The future of fraud prevention lies in harnessing the power of AI while maintaining a human-centric, ethical approach,” he says.