Firms are ill-equipped to tackle organized crime, there’s a growing appetite for real-time payments among firms that is not matched by consumer adoption, and the vast majority of firms are willing to trade AI explainability for efficiency.
These are the key findings from the fifth consecutive State of Financial Crime report, compiled by ComplyAdvantage. The report looks at the state of global financial crime in 2024 and “examines the evolving landscape of compliance, financial crime prevention, and regulatory change” during that year.
“Throughout the year, emerging risks and shifting compliance priorities put added pressure on firms to adapt,” Andrew Davies, Global Head of Regulatory Affairs at ComplyAdvantage has said.
The findings are based on a global survey of 600 senior financial crime decision-makers, and provide an insight into the trends and topics that are set to dominate the compliance sector in the near future.
Key findings
According to the report, 2024 was marked by political tensions, instability in Eastern Europe and the Middle East, the rapid advance of technology such as generative AI and its impact on compliance and crime, as well as the increased appetite for real-time payment (RPT) facilities around the world.
Key findings of the report include:
- Organized crime is becoming more complex and prevalent. But firms lack the necessary clarity and guidance to tackle it. More than two-thirds of those surveyed for the report said they needed clearer guidance.
- Global appetite for real-time payments (RPTs) is on the rise, especially in Europe. The US is catching up but consumer adoption is still low. The UK and India lead globally.
- The report says that: “91% of firms are willing to trade AI explainability for efficiency, despite 70% believing they understand regulatory oversight of AI in financial crime detection.”
Spotlight on financial crime
Another key finding of the report sheds light on the constantly increasing cost of compliance for global businesses, with more than half of the firms surveyed saying they had seen a 10% increase in 2022 and 2023.
Firms are also increasingly adopting AI solutions in their compliance practice, including for “alert prioritisation, reducing remediation times, analysing historical data, and creating reports using generative AI (GenAI).”
On the flip side, increased reliance on and adoption of advanced technologies have also led to a global increase in organized crime. Core organized crime activities include the global drug market, human trafficking, environmental crime, trafficking weapons, counterfeiting and extortion, and racketeering.
“Organised crime keeps evolving, seeking new methods, opportunities, and vulnerabilities.”
Compliance Advantage State of Financial Crime report
The impact of organized crime “goes far beyond headline figures to directly affect individuals, families, communities, and the environment,” according to the report. “Organised crime keeps evolving, seeking new methods, opportunities, and vulnerabilities. This suggests that 2025 will be another year where, despite some law enforcement successes, OCGs will prove their resilience.”
Other wider crime trends observed in 2024 included cybercrime, with some trends such as financial fraud and scams, imposter frauds, investment and founder frauds and romance+investment (pig butchering) expected to continue and gain pace in 2025.
Bribery and corruption, especially political and corporate bribery, money laundering and terrorist financing also remain key challenges facing the global finance industry.
In terms of emerging risks, the crypto industry is a notable area in which criminals are active. And the challenges posed by generative AI, such as deepfake and other types of AI misuse by criminals, need serious attention.
Regional trends
According to the report, “the most significant illicit flows in and/or through the US came from fraud, illegal narcotics, cybercrime, human trafficking, illegal migration, and corruption,” based on information produced by the US Treasury.
“Much like in the US, the core activities of European organized crime include illegal drugs, fraud, migrant smuggling, and human trafficking,” the report has found. “Another growing area of fraudulent activity in Europe in 2024 has been a growth in fraud around the European sales tax, Value Added Tax (VAT).”
In the Asia-Pacific region, just as in the US and Europe, there is an increasing amount of criminal activity by foreign, mostly Chinese organized crime gangs or OCGs. The report refers to a study by the US institute of Peace in May 2024, which found that “syndicates based in the region generated illicit proceeds of $64 billion worldwide in 2023 alone.”
Looking ahead, the reports says: “If the world becomes more fragmented and unstable in 2025 – a reasonable possibility – then criminals will probably face new challenges initially. Still, experience suggests they will quickly regroup, innovate, and find new ways to make money.”
In terms of advice for businesses, the report says: “You need to look closely at the range of risks your firm faces – from specific predicate offences to money laundering and terrorist financing. You need to internalise and understand those risks and act accordingly, using reliable risk data and agile platforms.”
Geopolitical factors
Geopolitical tensions and instability, especially in Eastern Europe and the Middle East, were also among factors that shaped the global financial crime landscape in 2024. Around 1.5 billion people across the world were involved in electoral processes, including in countries like the UK, the US and India, the report has noted.
Russia’s invasion of Ukraine has made the world geopolitically more unsettled, with the West responding with sanctions on Russian officials, bans on exports to Russia, freezing of Russian assets, and other measures.
However, these sanctions have not achieved the intended goals. The report refers to a study by the Royal United Services Institute which said “professional ‘enablers’ in the legal, financial, and professional services sectors” – parts of which it has called “the wealth defence industry” – “were continuing to work on behalf of Russian figures, often through oligarchs’ associates, family members, and intermediaries.”
The war between Israel and Hamas and its backers, as well as Iran’s proxy war against the West being played out across the Middle East, have and will continue to shape the financial crime landscape in the region as well as globally.
China’s newly-found appetite for global leadership, and its increasing influence on the global stage, have also been mentioned as key challenges for the West in the near future.
Transnational organized crime, cybercrime that links state and non-state actors, human rights violations, corruption and terrorism across the world will also continue to have an impact on the global financial crime landscape, according to the report.
in terms of advice for firms, the report says: “To best insulate your firm from sanctions, terrorist financing, and money-laundering risks, you need to have extremely robust but flexible ongoing customer due diligence, drawing on the best risk information available.
This means not only up-to-date sanctions and PEP lists but also adverse media information that can help identify high-risk counterparties not yet designated by governments.”
Regulation
The report highlights a number of key developments in the financial regulation sector which are expected to help fight financial crime across the globe over the coming years.
In the US, the Corporate Transparency Act (CTA) has been mentioned as useful, but doubts remain over whether the newly re-elected President Donald Trump will stick to it.
Also, the requirement for “businesses to report information on who owns and controls the company to the Treasury’s Financial Crimes Enforcement Network (FinCEN)” from 1 January 2025 has also been seen as a positive step.
“Much like in the US, the core activities of European organised crime include illegal drugs, fraud, migrant smuggling, and human trafficking.”
Compliance Advantage State of Financial Crime report
“The Anti-Money Laundering Regulations for Residential Real Estate Transfers requires a new category of persons to submit reports and maintain records on certain types of financial transfers linked to residential real estate property deals involving legal entities and trusts,” according to the report.
In the EU, the new AML Package is expected to “make it harder for criminal networks to launder money or misuse corporate entities to support criminal activities.” And the report adds: “At the private sector level, Regulation (EU) 2024/1624 (AMLR) details requirements directly applicable to the private sector to prevent the financial system from being used to launder money or finance terrorism.”
The report has also found, from responses by financial crime decision-makers in Germany, France and the Netherlands, that “the overwhelming majority of firms were making significant adjustments to accommodate the Single Euro Payments Area (SEPA) Instant Credit Transfer (ICT) scheme.”
In the UK: “The FCA and PSR are expected to monitor compliance in 2025 with the APP fraud reimbursement regimes to identify prudential issues, conduct breaches, and inadequate systems and controls.”
In China, the revised Anti-Money Laundering Law “aims to strengthen the rule of law in AML work and specifies that AML efforts should be conducted according to the law and that efforts should be compatible with risks.”
The AI factor
The report warns that criminals and malicious actors around the world are adopting and using AI at the same pace as compliance practitioners, though for entirely opposite purposes.
The US has been criticized for still not having a clear federal approach to AI governance, with Big Tech companies accused of not following the federal government’s lead on some recently introduced rules.
“Much like the US, Canada lacks a comprehensive legal and regulatory framework for AI, although, again, much like the US, several federal laws with some relevance for privacy and security standards already exist,” the report adds.
On the other hand, the report praises the EU for having a more centralized and top-down framework for AI regulation, with the EU AI Act being a prime example of the bloc’s success on the regulatory front.
And in the Asia-Pacific region, economic, political, and cultural diversity has meant that the region has a very fragmented approach to AI regulation, with less than half the countries there having started putting together a regulatory framework.
Despite that context, China has been praised as a regional leader in AI regulation, with many of its rules and frameworks being used elsewhere in different local contexts, the report says.
The report also adds that there is global consensus on the principles of safe AI, and that many countries will implement relevant rules. But intervention by some Big Techs might hinder the process to an extent.
Real-time payment boom
The final section of the report discusses the increasing global appetite for real-time payment schemes (RTPs), calling them the most positive development in the financial sector over the last four decades.
According to a World Bank estimate: “The global RTPS market will grow at a compound annual rate of 35.5 percent between 2023 and 2030, with Asia-Pacific dominating that growth.”
The report also notes that advances in blockchain technology and the emergence of crypto and other digital assets has enabled a global instant transactions mechanism, which doesn’t require any intermediary.
Looking ahead, the report predicts that “2025 will be a big-bang year for real-time payments in Europe, and as ever, this is likely to have an ongoing
ripple effect on the wider world.”
In terms of advice for firms, the report says: “The development of RTPS, nationally and cross-border, raises serious challenges for PSPs and other financial institutions. Beyond the obvious technical issues, you must ensure that your firm has near real-time screening and monitoring in place to ensure risks are detected and mitigated quickly.”
The report also touches on the subject of beneficial ownership (BO) and the importance of transparency around the ownership of companies around the world.
That fact that 90 countries have already started their own BO register, requiring firms to reveal information on who owns and controls them, is a positive sign, and 26 countries are in the process of opening their BO register, while 41 other nations are planing to take the necessary step.
You can find our coverage of the previous two editions of the State of Financial Crime reports here and here.