AI revolutionising financial crime detection by 2025

The landscape of financial crime prevention is poised for significant change, with economic pressures, advancements in artificial intelligence (AI), and rising standards shaping the industry's future in 2025, according to new analysis by Efficient Frontiers International (EFI).

Rob Cutler, Director at EFI, identifies AI and quantum computing as pivotal in transforming the detection of financial crime. "Artificial intelligence (AI) and quantum computing are set to revolutionise financial crime detection, but they also introduce new risks. AI-powered systems are already improving the efficiency of transaction monitoring by analysing vast datasets in real-time, reducing false positives and enabling quicker detection of suspicious activities," Cutler explained.

Cutler highlighted the dual-edged nature of these technologies, noting their potential misuse. "However, the same technologies are being exploited by cybercriminals. AI is being used to create synthetic identities and automate large-scale fraud, while deepfake technology has enabled more sophisticated scams. Meanwhile, quantum computing's immense processing power poses a future threat to cryptographic security, potentially enabling attackers to bypass encryption protocols currently used to protect financial data."

As technology evolves, the "race" between criminals and financial entities intensifies. "The race between criminals and financial institutions to leverage AI and quantum computing is intensifying. As these technologies evolve, financial institutions must stay ahead by investing in quantum-resistant encryption and AI-driven fraud detection systems. The arms race for who will benefit first is critical for the future of financial crime prevention," Cutler asserted.

Economic conditions are also influencing changes within financial institutions' approaches to compliance. "Many financial institutions are feeling the pressure to reduce costs in the wake of economic uncertainty. As profitability forecasts remain subdued, financial crime compliance, which is traditionally a resource-heavy function, is being scrutinised for efficiency improvements. Firms are increasingly considering outsourcing and offshoring solutions to maintain compliance while reducing operational costs," Cutler observed.

He suggested outsourcing as a viable strategy amid high regulatory scrutiny. "Though regulatory scrutiny remains high, strategic outsourcing allows institutions to gain access to specialist expertise and reduce overhead costs, without sacrificing compliance standards. As the focus shifts towards core business functions like client relationships, operations like financial crime compliance may be better handled by external experts."

This shift poses a question for financial institutions about the necessity of maintaining in-house crime operations. "Financial institutions are asking whether financial crime operations need to stay in-house. By outsourcing these functions, firms can reduce costs, alleviate operational headaches, and ensure their compliance functions remain effective and agile," Cutler added.

The role of financial crime analysts is expected to change significantly, driven by contraction in the economic landscape. "As the economic landscape contracts, firms are expected to do less remediation and shift their focus towards acquiring new business. This shift will reduce demand for generalist financial crime analysts. Instead, there will be a growing demand for highly skilled professionals with strong technical and analytical capabilities," Cutler noted.

Cutler explained that analysts will need to adapt to new tools and techniques. "Financial crime teams will need to become more data-driven. Analysts must adapt to working with AI-driven tools, machine learning techniques, and regulatory technology (RegTech). As the market for financial crime roles shrinks, firms will prioritise professionals who can add value through expertise in emerging technologies and data analysis."

The trend towards professionalising the role of analysts is gathering pace. "The trend towards professionalising the financial crime analyst role is gaining momentum. Organisations will no longer hire analysts based solely on basic qualifications. Those who can upskill to meet the increasing demands of AI and machine learning will thrive, while those who don't will struggle to keep up," Cutler concluded.

Efforts to prepare for the future of financial crime compliance will require institutions to focus on efficiency, leverage new technologies, and ensure their compliance teams can meet industry standards. EFI continues to provide support to organisations as the sector undergoes these changes.