AI a Top Risk and the Preferred Solution to Financial Crime

Generative AI tools are the most effective way to tackle financial crime, but also a number one threat, according to a new survey of anti-money laundering (AML) professionals.

Feedzai interviewed hundreds of compliance workers in the sector to compile its latest study, The State of Global Anti Money Laundering Compliance Report 2023.

It found that the threat from generative AI tools like ChatGPT and related technology is now regarded as the top challenge for AML professionals, more so than regulation, cryptocurrency and blockchain, which came top last year.

Nearly half (46%) of AML professionals polled said they are concerned about increasingly sophisticated money laundering techniques that include generative AI.

Generative AI models can be used to make money laundering processes more efficient for financial criminals – for example by helping to create fake companies, invoices, records and financial statements, find loopholes in legislation and even generate offshore accounts in which to hide funds.

However, a third (33%) of AML professionals told Feedzai that AI and machine learning are the most effective method for preventing money laundering. Of those already using the technology, 60% said it had helped drive efficiencies in their organization’s AML processes.

In fact, as far back as 2018, the US Financial Crimes Enforcement Network (FinCEN) flagged that AI could be used to reduce the cost of compliance and enhance money laundering risk management.

Generative AI tools can be used to optimize data searches and identify bad actors, generate “what-if” scenarios and even as a training aid for risk teams, among other things.

Feedzai’s principal AML subject matter expert, Nick Parfitt, argued that banks are sitting on a wealth of data that could be used to better protect their customers and business.

“Fraudsters are capitalizing on fast-developing technologies to trick existing AML programmes, in many cases using generative AI to their advantage,” he added.

“Our latest report reiterates the demand from AML professionals for their organizations to adopt AI in combination with human insight as a defensive weapon to improve their compliance process and efficiencies.”