The Technology Behind Tookitaki's AFC Ecosystem: A Deep Dive

10 mins

In an age marked by the rapid pace of technological advancement and globalization, financial crime has emerged as a multi-faceted and increasingly complex problem. From money laundering schemes that cloak illicit funds within layers of legitimate transactions to sophisticated frauds that exploit the digital vulnerabilities of modern banking, financial institutions face a daunting array of threats that evolve almost as quickly as the technologies designed to stop them. The situation has further been aggravated by the digital transformation of the financial sector, which has expanded the avenues through which criminals can exploit the system. 

As financial crime becomes more intricate, traditional rule-based approaches to compliance and monitoring are falling short. The old systems, often isolated silos of data, are unable to adapt swiftly to the constantly shifting regulatory landscape and emerging typologies of financial crime. Moreover, these systems face severe limitations in scalability, speed, and accuracy.

Recognizing the limitations of existing solutions and the dire need for innovation, Tookitaki has pioneered the Anti-Financial Crime (AFC) Ecosystem—an advanced platform designed to bring the fight against financial crime into the 21st century. With a focus on community collaboration, the AFC Ecosystem combines state-of-the-art technology with collective expertise to create a holistic, adaptive, and extremely effective compliance solution. It moves beyond the reactive and isolated approaches of the past, towards a proactive, unified, and intelligent model that is better suited to tackle the complex challenges posed by modern financial systems.

The Growing Challenges of Financial Crime

The Escalating Risks: Statistics and Trends

Financial crime is not just a persistent issue; it's an escalating one. According to a report from the United Nations Office on Drugs and Crime, it is estimated that the amount of money laundered globally in one year is 2-5% of global GDP, or $800 billion to $2 trillion in current U.S. dollars. Moreover, cybercrime costs are predicted to reach $10.5 trillion annually by 2025, a threefold increase from the 2015 figures. These astronomical numbers underline the enormous scale and gravity of the problem.

But it's not just the volume of financial crime that's concerning; it's also its complexity. Criminal networks are increasingly leveraging sophisticated technologies like artificial intelligence and blockchain to conceal their activities, making it harder for authorities to detect and trace illicit transactions. 

The Burden on Financial Institutions: Operational Challenges and Compliance Costs

Financial institutions find themselves at the forefront of this battle, saddled with the dual responsibilities of not only safeguarding customers' assets but also ensuring rigorous compliance with a growing and ever-changing set of regulations. In the U.S. alone, regulatory compliance costs the financial services sector upwards of $270 billion every year.

One of the biggest operational challenges is the integration and updating of Anti-Money Laundering (AML) systems. Traditional rule-based systems are inadequate in handling the dynamic changes in regulations and typologies of financial crime, requiring constant manual updates and tuning. This process is not only cumbersome but also prone to errors, exposing institutions to regulatory risks.

Major banks report taking up to nine months to onboard new compliance scenarios—time during which they are vulnerable to emerging threats. Additionally, this protracted process comes with a high cost. For instance, threshold tuning—a critical part of implementing new scenarios—alone can require significant manpower and financial resources. For burgeoning fintech companies eager to disrupt the market with new products, this operational bottleneck can severely stymie growth and innovation.

Limitations of Traditional Approaches

The Pitfalls of Rule-Based Systems

Traditional approaches to combating financial crime have predominantly relied on rule-based systems. These systems operate on predefined sets of rules that identify suspicious activities based on certain criteria, such as large transactions over a specific threshold, multiple small transactions within a short period, or transactions to high-risk geographical locations.

While straightforward and relatively easy to implement, rule-based systems come with a host of limitations. First, they are highly susceptible to false positives and negatives. Given their rigid criteria, they may flag innocuous transactions as suspicious while missing activities that don't fit within their predefined rules but are nonetheless illicit.

Secondly, these systems operate in isolation due to data privacy and security regulations, making it difficult to share information and insights between different departments within the same organization, let alone with other organizations. This lack of data sharing hampers the collective understanding of evolving financial crime tactics, creating vulnerabilities.

The Need for Speed: Adapting to a Changing Regulatory Landscape

In the current era, financial crime is not stagnant; it's an evolving menace that adapts to countermeasures swiftly. This requires financial institutions to be equally agile in adapting to new forms of financial crime as well as to changing regulatory landscapes. However, the monolithic and inflexible architecture of traditional rule-based systems makes them slow to adapt to these changes.

New rules and updates don't just need to be coded into the system; they also need to undergo extensive testing before they can go live. This whole process is both time-consuming and resource-intensive. For instance, major banks report taking up to nine months to implement new compliance scenarios, making them vulnerable to new and emerging threats during this period.

Given this backdrop, there's a growing recognition that traditional methods are inadequate for the challenges of today's fast-paced and complex financial environment. What's needed is an approach that can adapt quickly to changing regulatory norms and emerging threats—an approach that Tookitaki's AFC Ecosystem aims to offer.

Tookitaki's AFC Ecosystem: A Revolutionary Approach

In a world where financial crime is becoming increasingly complex and adaptive, the need for a robust, agile, and community-driven approach has never been more acute. Enter Tookitaki's Anti-Financial Crime (AFC) Ecosystem—a platform designed to address these challenges head-on by marrying advanced technology with the collective intelligence of a network of experts.

Tookitaki AFC Ecosystem

Core Components: AFC Network and Typology Repository

The AFC Ecosystem comprises two main pillars: the AFC Network and the Typology Repository. These components work in tandem to create a comprehensive and dynamic system that evolves with the ever-changing landscape of financial crime.

AFC Network

Purpose and Participants

The AFC Network serves as a hub for professionals across various sectors, including financial institutions, risk advisory firms, law firms, and international NGOs, all united by a common goal: combating financial crime. This broad array of expertise provides a rich well of resources and knowledge for identifying and understanding new and emerging threats.

How it Fosters Collaboration

The AFC Network encourages the sharing of intelligence, best practices, and typologies related to money laundering, fraud, and other forms of financial crime. This shared intelligence allows for more effective targeting of resources, enhances the resiliency of financial crime programs, and keeps all network members abreast of the latest developments in the field. The collaborative nature of the AFC Network addresses one of the key shortcomings of traditional methods—the inability to share insights across organizations due to regulatory constraints and data privacy concerns.

Typology Repository

Based on Federated Learning

The Typology Repository is not just a database; it's an intelligent platform based on federated learning, which enables the sharing of information in a secure and privacy-preserving manner. Federated learning allows for the aggregation of insights from various organizations without directly sharing sensitive or personally identifiable information (PII), overcoming a significant hurdle in traditional financial crime-fighting methods.

Key Functionalities Offered to AFC Network Members

Members of the AFC Network have access to a variety of functionalities within the Typology Repository. These include Typology Design Studio, Federated Insights Card and Federated Knowledge Base. 

By combining the collaborative capabilities of the AFC Network with the advanced technological solutions housed in the Typology Repository, Tookitaki's AFC Ecosystem represents a paradigm shift in the fight against financial crime.

The Tech Behind the AFC Ecosystem

Understanding the technology that powers Tookitaki's AFC Ecosystem is crucial for appreciating its revolutionary impact on the financial industry. The ecosystem is built on state-of-the-art tech components that not only offer solutions for today's challenges but are also designed to evolve with the emerging threats of tomorrow. Below, we delve into the technology of the three primary components of the system: Typology Design Studio, Federated Insights Card, and Federated Knowledge Base.

Typology Design Studio

Features and How It Enables Professionals to Create and Review Typologies

The Typology Design Studio is a unique workspace that allows financial crime experts to construct and validate typologies. It offers a no-code, drag-and-drop interface, making it user-friendly and efficient. Users can configure properties for entities and both transactional and non-transactional aspects. Moreover, it includes standardized programmatic tokens that encapsulate the modus operandi of financial crimes without sharing any Personally Identifiable Information (PII).

One standout feature is the in-built review workflow. It ensures that typologies are critically reviewed for accuracy and completeness before they go live, offering an extra layer of quality control. This collaborative review process aligns perfectly with the AFC Ecosystem's overarching mission of fostering community-based insight.

Federated Insights Card

What It Is and How It's Generated

Once a typology is approved through the Typology Design Studio, a Federated Insights Card is automatically generated. These cards are essentially programmatic digitizations of financial crime risks. They serve as structured intelligence assets that capture the essence of each typology, encapsulating key information in a digestible format.

Its Role in Decision-Making

The Federated Insights Cards play a vital role in decision-making by allowing financial institutions to quickly understand the risks associated with different typologies. They can be downloaded and disseminated across various channels, making it easier for AFC Network members to integrate these insights into their risk assessments and decision-making processes. This functionality replaces the traditional, cumbersome methods of sharing paper-based or electronic reports, significantly speeding up the reaction time to emerging threats.

Federated Knowledge Base

Description and Key Features

The Federated Knowledge Base is essentially a library of these Federated Insights Cards. It stands as the largest community-curated database of financial crime patterns and typologies. Each card in this database has been reviewed and approved by experts in the AFC Network, ensuring a high level of credibility and relevance.

How Smart Select and Smart Discover Work

Navigating such a vast repository could be daunting, but the Federated Knowledge Base makes this easy with features like Smart Select and Smart Discover.

  • Smart Select: A free search field that scans the database to provide the most relevant matches based on the user input. This feature eliminates the need to manually sift through endless records, offering a quick and efficient way to find pertinent information.
  • Smart Discover: This feature allows users to add multiple filters to their search, narrowing down the results to the most relevant Insights Cards. Users can filter based on criteria such as type of financial crime, geographic location, or financial products involved, making it easier to find tailored insights.

By integrating these tech components seamlessly, Tookitaki's AFC Ecosystem provides an agile, collaborative, and intelligent solution to combating financial crime. It represents a new era in which technology and community-driven insights coalesce to create a safer and more secure financial landscape.

Case Study: A Leading Fintech in Singapore

The increasing complexity of financial crimes and the rapid evolution of regulatory landscapes present unique challenges for fintech companies. In this case study, we'll explore how a leading fintech company in Singapore leveraged Tookitaki's AFC Ecosystem to navigate these challenges successfully.

Background and Challenges

In the fast-paced, highly competitive digital banking environment of Singapore, our client, a next-generation digital bank, aiming for a swift yet compliant launch. The challenges were manifold:

  • Meeting the stringent requirements set forth by the Monetary Authority of Singapore (MAS).
  • Adapting to changing local and international regulations.
  • Establishing typologies based on local rules and conditions.

The hurdles were not just about compliance but also about achieving these goals in a time-efficient manner to maintain a competitive edge.

How AFC Ecosystem Provided Solutions

The fintech company turned to Tookitaki's AFC Ecosystem for a community-driven, agile solution to their compliance woes. The system offered:

  • Access to the Federated Knowledge Base: An expansive, continuously updated repository of financial crime typologies and risk factors.
  • Relevant Typologies for MAS Compliance: By tapping into the AFC Network and Typology Repository, the digital bank could identify the typologies most relevant to MAS regulations.
  • Expert-Validated Typologies: The typologies they employed were not just compliant but had been validated by a network of AML experts, making their implementation smoother and more credible during model validation.
  • Quick Implementation: The fintech firm successfully deployed over 20 typologies, encompassing various financial products like savings accounts, lending, payment, and SME banking.

Results and Benefits Achieved

The advantages were immediately apparent:

  • 100% Risk Coverage: By leveraging expert-validated typologies, the digital bank could confidently state they had full coverage of known financial crime risks as per MAS regulations.
  • ~50% Reduction in Time to Onboard New Scenarios: With the help of the AFC Ecosystem, the time to implement new compliance scenarios was cut in half, significantly speeding up their journey to full compliance and market readiness.

By integrating the AFC Ecosystem into its compliance strategy, the fintech firm not only met but exceeded regulatory expectations, positioning itself as a leader in risk management and compliance. This case study serves as a compelling testament to the tangible benefits of adopting Tookitaki's revolutionary approach to fighting financial crime.

Final Thoughts

The financial industry is at a critical juncture. With financial crimes becoming increasingly sophisticated and regulatory landscapes continuously evolving, traditional methods of compliance are no longer sufficient. The challenges are not just regulatory but are fundamentally about protecting the integrity and safety of the financial ecosystem. As we've seen, no single institution can effectively tackle these problems in isolation.

This is why the community-driven approach pioneered by Tookitaki's AFC Ecosystem is so revolutionary. By fostering a sense of shared responsibility and collective intelligence, the AFC Ecosystem enables financial institutions to not only keep up with the challenges but also to turn compliance into a strategic advantage. The ecosystem's robust functionalities, ranging from the AFC Network to the Typology Repository, enable rapid, scalable, and cost-effective solutions for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).

In a world where criminals are constantly evolving their tactics, a static defence is no defence at all. The AFC Ecosystem offers a dynamic, community-driven shield against financial crimes. It provides a platform where expertise is shared, challenges are collectively addressed, and solutions are jointly developed. By democratizing insights and fostering collaboration, Tookitaki is not merely keeping up with the criminals; it's staying one step ahead.

We encourage all financial institutions, from established banks to emerging fintech companies, to join the AFC Ecosystem. Together, we can build a safer, more secure financial environment for everyone involved. By embracing this revolutionary approach, financial institutions are not just fulfilling regulatory requirements; they are actively contributing to a safer and more secure financial future for all. Join us in this endeavour and be part of the solution.