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OPINION

By Prof Norman Mugarura (PhD)

Times are changing and with the advent of Artificial Intelligence (AI) we are on the cusp of a continued internet revolution and potentially could be swamped if we do not prepare accordingly.

Prophet Jeremiah in the Bible was known for largely prophesying bad news and was branded a “trouble maker” in Israel.

We should never allow ourselves to be deluded like King Ahab (also in the Bible) who embarked on the spree of killing God’s prophets for prophesying what he did not want to hear; it was because of his inward parochial attitude that he met his death in circumstances Prophet Micaiah had earlier warned him about that could have been avoided.

One thing that remains constant is that criminals do not sleep, far from it they are more active at night, crafting schemes to evade the long arm of law enforcement agencies!

It is noted that digitalisation has driven up operational costs and ramped pressure more pressure on the already stretched compliance teams to quickly and efficiently perform their tasks.

The fact that traditional Know Your Customer (KYC) programmes by banks has placed a heavy cost burden on those concerned, the use of AI can leverage institutions to easily detect complex patterns of illicit activities both within the country and beyond.

A research study conducted on KYC in the UK (2014) showed that some banks are losing more than 10% of their profits in conducting due diligence and other necessary compliance requirements.

In the survey conducted by Thomson Reuters, financial institutions with $10 billion or more in revenue have seen their average costs spent on KYC-related procedures increase to $150m this year from $142m in 2016, while the number of employees they deployed skyrocketed to an average of 307 KYC compliance professionals in 2017 from 68.

The majority of financial institutions reported that the lack of adequate resources remains their biggest challenge in effecting robust Know Your Customer (KYC) and customer due diligence (CDD) processes.

AI can help revolutionise how the right information is quickly generated to facilitate customer due diligence and improve remediation activities in businesses. With AI, businesses will be more proactive with regard to how information is generated and used to prevent financial crimes such as money laundering, countering financing of terrorism and proliferation financing.

AI will leverage machine learning to improve accuracy and risk assessment models, making possible for businesses to create mechanisms and stay a step ahead of criminals who perpetuate illicit financial crimes. The ease with which AI can be integrated with blockchain technology can further secure the ability of firms to track and trace transactions, making it hard for criminals to remain on the loose.

The AI in anti-money laundering and countering of financing of terrorism regulation can make firms more efficient, effective and adaptable to the dynamic threats faced by the financial industry today. The AI revolution can leverage businesses to give alerts to the customers on how to safeguard against the possibility of criminal exploitation. It was noted in a study conducted by banks worldwide in 2017 that the impact of continuing KYC was the biggest driver affecting their compliance processes.

This was causing businesses to allocate more resources to cope with the pressure imposed by dynamic changes to the financial industry today.

The impact of increased regulatory requirements was precipitating a backlash clash and customer friction (for example, in the US some banks were sued for infringement on the rights to privacy of customers), higher costs and potentially lost business. One wonders whether financial institutions in the least developed countries (LDCs) cohort have sufficient capacity to cope with the speed and dynamics of the current Internet revolution.

Recently, I read an article in the press where the director of supervision in Bank of Uganda Dr Manzi Tumubweine concedes that despite the central bank’s wide-ranging powers, it did not have sufficient capacity to prevent AI-related fraud. The Internet revolution has been moving faster and at the speed than developing countries can afford to cope with, hence posing the dilemma of possible criminal exploitation.

I appreciate that no country can remain indifferent in the face of wide-ranging pervasive global changes. It may be wise for some countries to go slow before they adopt some of global technologies gradually. Without a clear strategy on how to harness these technologies firms can easily get swamped or exploited by criminals.

The challenge is that as a result of globalisation, some of these technologies can be initiated at the periphery of the state but with wide-ranging implications in the state, even if they have not been implemented.

States cannot sit and do nothing; they will need to train robustly if they are to survive the onslaught of the internet technological revolution, including the use AI in their business operations.

I think it is a failure of policy on the part of respective governments for someone who has a master’s degree or a PhD degree in internet engineering to languish without a stable job in the country simply because they do not have what in Uganda is known as “connections”.

There should be a policy framework like in Ghana, Malawi and other countries to attract highly trained talents either from the diaspora or in the country into the workforce of the country with or without political connections.

How can a double PhD holder in technical areas where the country is deficient in requisite capacity struggle to get a firm foothold in the job market?

This can only happen in developing countries not in the US, Canada or the UK where they are ruthlessly headhunt talents for their economy’s expedience.

The writer is a credentialled financial law expert at Kagera Advocates, Kampala. He is also an associate professor of Law at Bishop Stuart University, Uganda and member of the Strategic Hub on Organised Crimes (SHOC), RUSI Group, London