AML (Anti-money Laundering) systems are a rapidly evolving area of technology, which has to compensate for the constant increase in volume and complexity of online financial crime, according to an extensive update shared by Juniper Research.
Juniper Research defines anti-money laundering systems as “a set of solutions used to help companies prevent, detect, investigate and report suspicious activity indicative of money laundering or terrorist financing, AML systems can facilitate faster and more accurate compliance and investigation.”
In a new report, Juniper Research explains that AML solutions are able to “help businesses combat the increasingly sophisticated methods that criminals move towards to avoid detection, leading to an increase in more advanced technology that can protect businesses against financial crime based on advanced technology such as behavioral analytics.”
AML includes a set of policies, procedures, and technologies “that prevent money laundering.”
The Juniper Research report further noted that money laundering “refers to the process of taking illegally obtained money and making it appear to have come from a legitimate source, by putting the money through a series of commercial transactions in order to ‘clean’ the money.”
The term arose from regulatory standards, specifically “to detail the concealing of financial movements for underlying crimes ranging from tax evasion, drug trafficking, public corruption and the financing of terrorist groups.”
The report from Juniper Research also mentioned that there “are many types of people who can commit money laundering, such as organized criminals, terrorist groups, corrupt heads of state, business leaders, and senior executives who manipulate or misreport financial data.”
The financial sector is also struggling “to keep up with an unprecedented rise in fraud and d financial crime.”
It is becoming increasingly difficult “to operate in the industry without being infiltrated by criminals at all levels.”
They are creative, connected, collaborative, and ready “to take advantage of any opportunity they find inside or around business operations. As financial crime becomes more complex and interconnected, siloed systems and processes become less effective in detecting and preventing them.”
These practices make it difficult “for financial institutions to detect, prevent, and investigate crimes.”
Furthermore, the pandemic has accelerated “the transition to a cashless and digital world, opening new opportunities for financial crime and fraud.”
The report from Juniper Research pointed out that in this modern complex environment, financial institutions are “unprepared to deal with these threats, which have always been the greatest concern for them.”
As stated in the update, growing money laundering technique “called ‘cyber laundering’ uses the digital sphere to conceal the source of illicit cash. Criminals find new ways to hide their tracks as technology advances at a rapid pace, making it more difficult for conventional detection techniques to apprehend them.”
The dark web gives criminals an additional degree of anonymity, “enabling them to conduct transactions without coming to light too quickly.”
Some financial institutions provide “a video identification service to customers who want to create bank accounts in order to verify their identity without requiring them to visit a branch office or post office to have their credentials confirmed.”
With this type of digital online service, users typically use “a smartphone app to identify themselves in a video conference with a financial institution or a subcontractor.”
As explained in the Juniper Research report, customers are required to gives answers to a few questions and also “show a valid identity card or passport to the camera in order to verify their identity.”
Online con artists have “mastered the art of taking advantage of this digital account opening option.”
They entice customers to “divulge personal information and participate in a video identification procedure.”
The criminals utilize the accounts “created in the identities of their victims for illicit activities like money laundering and accepting payments from fake businesses.”
Over the forecast period, the total spend on third-party AML systems will “reach $51.6 billion by 2028, up from $28.67 billion in 2024. Rising by 80%, this growth will be driven by the use of AI to assist AML analysts and reduce false positives.”
The research found that AML systems are increasingly using AI in an assistive role.
These AI co-pilot systems can “reduce the number of false positives and improve risk assessment. We anticipate that this co-pilot role will remain popular, due to ongoing concerns from regulators around the explainability of fully automated decisions using AI.”
Juniper Research identified that AML system vendors “are increasingly expanding the scope of industries they cover beyond financial markets.”
For example, the total spend on third-party AML systems “by professional and other businesses, such as the legal, real estate and non-profit sectors, will reach $6.3 billion globally by 2028; growing 170% from 2024.”