The importance of Machine Learning in AML

Regulatory Reporting / AML


The international financial crisis has exposed the weaknesses of the regulatory system of financial markets and demonstrated inefficiencies in risk management procedures in the financial sector. In this context, the Basel Committee on Banking Supervision (BCBS) has defined the new rules, known as Basel III, in order to improve the ‘rules of definition of global capital and liquidity to increase the stability of the sector’.

Basel III is based on three pillars defined in the Basle II agreement and adjusts the agreement to the current challenging reality of the financial markets, namely:

  • A more rigorous definition of capital in order to ensure a greater quantity, quality, transparency and coherence of the capital base;
  • The introduction of new capital buffers (Capital Conservation Buffer and Countercyclical Capital Buffer);
  • The strengthening of risk coverage, including counterparty credit risk (CCR Counterparty Credit Risk);
  • Leverage ratio implementation, in order to complement the Basel II framework, based on risk;
  • The implementation of new short- and long-term liquidity ratios (LCR Liquidity Coverage Ratio and NSFR Net Stable Funding Ratio);
  • The introduction of the concept of systemically important institutions (Systemically Important Financial Institution).


The CRR Capital Requirements Regulation and the CRD Capital Requirement Directive constitute the European transposition of Basel III: the legal basis approved by the European Parliament and the Council of the European Union, which defines a set of prudential requirements for credit institutions and investment firms. Regulation applies from 1 January 2014, but a transition period is anticipated, until the year 2019. During this period the new requirements will be phased in.


With the standardization of regulation, there was also a need to implement reports with uniform requirements and definitions through the Common Reporting Guidelines (COREP), a defined model for reporting information of a prudential nature, and Financial Reporting (FINREP), a model defined for reporting financial and accounting information.