Reflections on the changing nature of fighting financial crime

Over the last year, Deloitte has set out its thinking on the Future of Financial Crime, highlighting the shift towards a more integrated, dynamic, and technology-driven approach to compliance. Through a series of articles, we have explored specific changes needed to achieve this, including intelligence-led risk management, dynamic customer lifecycle management, integrated client risk monitoring, proactive FIUs and operational transformation, all underpinned by a holistic data and technology strategy.

The evolving landscape of financial crime

Reflecting on these articles and our practice with industry leaders, we are seeing a remarkable convergence in terms of the target state for financial crime (FC) in large financial institutions in the medium term (Three to five years). Although we see variance in terms of timing and maturity due to risk appetite, complexity and client base, we are seeing encouraging trends towards the future we articulated, including:

• Renewed focus on specific risks each institution faces and data sharing initiatives across the industry
• Rapid adoption of digital led Customer Due Diligence (CDD) and the application of AI to verify and augment this data
• Improvements in monitoring of client risk using external data and Machine Learning (ML) approaches
• Renewed interest in out-sourcing and off-shoring low value operational tasks, whilst building capabilities in model development and validation

The impact of technology and the rise of AI in financial crime

We knew technology would play a key part in the acceleration of our vision, but the pace of adoption and the advancements in AI and agentic AI have fast tracked elements of our view of the FC target state. With these advancements, there is clearly a wish to move at pace and there is excitement, yet this is tempered by challenges organisations face, some long-standing and some new. We have reviewed the feedback from the polls conducted from our previous articles and the results are depicted across four diagrams within the appendix you will find at the bottom of this article.

Some interesting feedback from the polls we conducted alongside the above articles highlight:

1. Over 60 per cent of respondents articulated a major barrier to change was understanding how the advancements in technology could support an organisation's vision and end state and stressed budget constraints would also hamper progress (see diagram 1 in appendix).
2. A key hurdle to achieving operational transformation appears to be ‘talent recruitment and retention’ (29 per cent), where securing the right talent fit for the future world and keeping them in a competitive market is still a problem many face (see diagram 2 in appendix).
3. Yet, a huge 71 per cent of respondents were confident that an uptick in enhanced effective monitoring could be achieved with a more client centric risk view (see diagram 3 in appendix).
4. The polls also show that some 84 per cent of respondents have started to trial or deploy AI across their FC estate with use cases being explored across a broad spectrum of areas including KYC / CDD, Transaction Monitoring, Sanctions Screening and Intelligence (See Diagram 4 – Benefits of AI in FC domains). The next step will be to deploy these solutions at scale and realise measurable benefits.

The path forward

In summary, understanding how to scale and deliver rapidly emerging technologies, how to secure and train the right talent and articulating a clear roadmap to the target state are the key challenges that organisations face right now. We see there being intense focus on solving these in the next 12-24 months as FC and technology teams adapt, leading to competitive advantage for those that can get ahead of these changes and deliver incremental benefits that pay for further innovation.

If what we are observing is correct, we urge financial institutions to react to these challenges and continue to move at pace. For those at the start of this transformation journey, a valuable first step is seeking the lessons from early adopting peers on what did / did not work. There is now history to learn from and this can help financial institutions to leapfrog forward. All financial institutions should assess whether their traditional organisational structure in FC risk management and technology capability is fit for purpose in this new landscape of integration, rapid change and digitisation.

What’s next?

To support the evolution and progress to the end state and address some of the challenges mentioned above, we are shifting the focus of our Future of Financial Crime series to three key elements to support the continued change being undertaken across the industry:

1. Measuring and demonstrating effectiveness in FC – investigating which FC activities have a positive impact on the FIs ability to counter threats and meet its wider societal obligations in an efficient way.
2. Adoption of AI technology in FC – how the rapidly evolving AI technology stack is changing the approach to technology ecosystems, partners and implementation approaches.
3. Approach to FC Talent - the evolving people requirements in an AI enabled environment and lessons learnt from building high performance teams.  

These issues are critical to the future state for tackling financial crime. Watch out for our next instalments coming soon. In the meantime, please get in touch if you wish to discuss any of the topics mentioned in this or our previous FoFC articles.