Firms must invest in technology and highly skilled teams with individuals who can navigate hostile threats alongside regulatory changes and technological innovations, ComplyAdvantage says in The State of Financial Crime 2024.

Some key findings and questions asked were:

• AI and automation: 89% of firms say they’re comfortable compromizing explainability for automation when deploying AI in their AML tech stacks.
• PEPs and elections: 61% expect to take a more risk-averse approach to PEPs in the next 12 months. But with 40+ national elections scheduled for 2024, will firms be able to keep up with the changing volumes of PEPs?
• Real-time payments: 90% have joined – or will join – a real-time payments program. What steps must firms take to prepare their AML programs for faster payments?
• Compliance investments: 49% of firms plan to add new technologies or capabilities, with 46% upskilling their compliance team. Can investments keep up with the growing complexity of financial crime?

“Firms should ensure that they remain abreast of guidance and international agreements around AI. Compliance leaders exploring AI solutions should ensure they understand and document the rationale behind exploring a solution and have the right clean data to train AI models,” said Iain Armstrong, Regulatory Affairs Practice Lead, ComplyAdvantage.

AI can offer solutions when deployed for the purposes of adverse media and sanctions screening, transaction monitoring, and automated reporting to regulators.

While the global economic downturn is squeezing budgets, a swathe of new and more complex regulations are being introduced. At the same time, governments continue to rely on financial institutions to implement sanctions and fight financial crime in support of foreign policy objectives and law enforcement action.

Similarly to last year’s report, the emphasis was on the need to hire good compliance professionals.

Payments innovations

In 2023, payments fraud fell to pre-pandemic levels. Card ID theft rose by 97% in one year alone, while contactless fraud increased by 82%.

However, remote purchase fraud continued to fall, and was down 4%. This is likely an early signal of the impacts of PSD2 and Strong Customer Authentication as customers and fraudsters are forced to authenticate more frequently than in previous years. 

Rise of AI

The rise of AI is linked to inciting terror attacks, generating deepfakes for ransom, extortion, and fraud, espionage, and the dissemination of child sexual abuse materials.

On the other hand, AI can offer solutions when deployed for the purposes of adverse media and sanctions screening, transaction monitoring, and automated reporting to regulators.

68% of firms said they have a good understanding of how legislators and regulators plan to regulate AI technologies and 59% say they are well prepared to meet proposed AI legislation.

“Documentation proving that they understand how the AI models work is also essential. Finally, firms should break down the silos between their financial crime compliance teams and cybersecurity teams to identify risks across their organization,” Armstrong said.