Money laundering has become a major global concern in recent years, with criminal organizations using sophisticated tactics to launder illicit funds and conceal their activities. Governments and financial institutions constantly seek new ways to combat money laundering and stay ahead of emerging threats. With the rapid pace of technological innovation and changes in global economic and political landscapes, efforts have become increasingly important in predicting the future of anti-money laundering, or AML.

In this article, Plug and Play explores some of the top AML predictions for 2023 from different experts in our ecosystem.

Julian Dixon, Board Chairman at Napier

Those of us who have spent our careers fighting financial crime have long dreamed of a silver bullet solution that will have a dramatic impact on driving out this scourge from global institutions.

It’s believed that fewer than 2% of money laundering crimes are prosecuted in a dark market that has grown substantially over the past couple of decades and contributes exponentially to the sum of human misery the world over. Financial regulators have called for institutions to take a risk-based approach to Financial Crime

Compliance, or FCC, but until now, RegTech has been able to deliver the software to support such an approach. It’s been difficult, data is disparate, and legacy systems are built for individual siloed solutions rather than the required all-encompassing approach. Until now, our systems haven’t been up to the challenge and have been expensive and arduous.

For the past two years, we at Napier have been working to develop the silver bullet the industry–and the world – has been crying out for, and we’re on the cusp of bringing it to market. Perpetual Client Risk Assessment, pRCA, delivers a 360-degree view of customer risk and universal case management.

Our system will overlay and augment existing systems, detect previously unknown risks, reduce false positives, react quickly to control gaps, provide a single point of operational triage, improve the customer experience, and streamline KYC, CDD/EDD, AML screening and monitoring and fraud, all in one user-friendly, cost-effective platform. 2023 will be the year we see the beginnings of a silver bullet in the fight against financial crime.

Anna Kazmierczak, Ventures Analyst in Fintech at Plug and Play Frankfurt

Thefintech industry has experienced significant growth in recent years, yet, this growth, besides the great benefits of digitization, has also led to an increase in the number of data breaches and financial frauds, posing a threat to the security of financial systems.

2022 was a record year for cybersecurity startups globally, and in 2023 the momentum continues. Banks and other financial players are doubling their security budgets this year to protect against cybersecurity threats.

Cybersecurity Ventures expects global cybercrime costs to grow by 15% per year over the next three years, reaching$10.5 tn annually by 2025, up from$3 T in 2015. So strong AML products are needed more than ever.

To mitigate financial fraud risks, AML tech innovations have emerged as essential tools for financial institutions to detect, prevent, and investigate financial crimes. One of the most significant AML tech trends is using ML and AI to analyze vast amounts of financial data and identify suspicious activities.

In the upcoming years, we will see more and more use cases beyond KYC and fraud detection in the financial sector, also applying to preventing internal frauds (e.g., SteelEye, Shield) and market abuse (e.g., Features Analytics), identifying suspicious networks (e.g., Linkurious) and having insights into the potential misconduct done by clients (e.g., in the insurance industry, Shift).

Highly-automated models integrating both real-time transactional data, customer and counterparty data, as well as external insights will enable financial institutions to detect fraudulent activities in real-time, analyze more transactions than before, and prevent false positives, at the same time-saving resources for the risk and compliance team (Quantexa is a great example of the player in that space).

Julia Ront, Co-founder and CEO at Vespia

It will not be cool anymore to just be a data aggregator. A few years ago, it was all about who had the most AML sources and data points and who managed to verify Ultimate Beneficial Owners or UBOs. 2023 will be all about analytics, machine learning, and AI to help the users, such as compliance officers and AML responsible employees, with decision-making.

One trend is that users are craving alternative sources like social media, blockchain information, and crypto wallet data. But the users also want more explanation and guidance on what they should decide. Automated risk scoring and risk pre-assessment will speed up the whole AML process at any company.

Another trend is that fintech,crypto, and even the traditional financial sector are switching away from those manual doc/ pdf AML forms and questionnaires, opting for a more streamlined, user-friendly onboarding flow. We all know this is an obligation, but filling out forms is a hassle for the end user, so implementing a smooth KYC/ KYB onboarding flow with as few steps as possible is important.

Shane Riedel, Founder and CEO at Elucidate

In 2023, we predict that pricing financial crime risk into payments will become an increasingly accepted and effective method for addressing financial crime. This prediction is based on recent moves by several banks in the Netherlands, including ABN Amro, ING, and Rabobank, to charge fees to their clients for conducting anti-money laundering checks on their behalf.

By assigning a monetary value to financial crime risk, these banks are incentivizing their clients to take the necessary steps to prevent financial crime.

The new fees for money laundering checks will encourage businesses and individuals to comply with the banks' requirements for conducting due diligence, identifying suspicious transactions, and reporting potential money laundering cases.

Thanks to its effect on behavior, leading to incorporating financial crime risk into decision-making, this approach will become increasingly popular among financial institutions around the world. By pricing financial crime risk into payments, businesses and financial institutions will become more vigilant about detecting and preventing fraudulent activities. This will result in fewer instances of financial crime taking place, reducing the overall cost of financial crime to society.

We expect that pricing financial crime risk into payments will become a standard practice for addressing financial crime. This approach incentivizes businesses and financial institutions to invest in measures to prevent financial crime, levels the playing field, and reduces the overall incidence of financial crime. As a result, we predict that this approach will continue to gain momentum in the coming years.

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