2023 AML Compliance Trends & Insights: Prepare Your Financial Institution for it

As we enter 2023, the Anti-Money Laundering (AML) compliance landscape is rapidly evolving to keep pace with the changing nature of financial crime. In this blog post, we will explore the key AML compliance trends that are likely to shape the industry in 2023.

Crypto continues to be one of the biggest challenges in AML Compliance

Crypto transactions will continue to be a challenge for AML compliance in 2023, with global cryptocurrency adoption rising to over 400 million users. According to a report by Reuters, the estimated total value of cryptocurrency transactions involving illicit activity in 2023 is projected to be over $20.1 billion. The anonymity of crypto transactions has made them an attractive option for money launderers, and AML compliance experts need to stay up-to-date with the latest developments in the crypto space to identify and prevent money laundering.

To prevent the risk of crypto crime, financial institutions need to implement Know Your Customer (KYC) procedures for crypto exchanges and wallets, similar to those used in traditional banking.

Crime as a service:

Criminals are increasingly using “Crime as a Service” (CaaS) to launder money. There are several types of CaaS, including malware-as-a-service, money laundering-as-a-service, and phishing-as-a-service. Criminal networks use CaaS to outsource their illegal activities to third parties, making it more difficult for law enforcement agencies to track and prosecute them.
To mitigate this risk, Vneuron is working to continuously develop its solutions that use machine learning algorithms to detect the patterns and networks of CaaS operations. Our solutions can provide real-time monitoring of transactions, identify anomalies, and flag suspicious activity. By leveraging advanced technologies, we can help businesses stay ahead of the evolving regulatory landscape and protect themselves from financial crime.

In addition to our technology solutions, we also prioritize educating our clients about the risks of CaaS and the importance of reporting suspicious activity. By working closely with our clients, we can ensure that they are fully informed about the latest threats and have the tools they need to prevent financial crime.

The new old topic in AML Compliance: Ultimate Beneficial Owner (UBO) :

The importance of Ultimate Beneficial Ownership (UBO) cannot be overstated in AML compliance and it is expected to be a hot topic in 2023. The EU’s 5th Anti-Money Laundering Directive (5AMLD) has made it mandatory for financial institutions to identify and verify the UBO of their customers. However, a recent European court ruling has created confusion and uncertainty regarding the legality of requesting UBO data and the violation of data privacy laws. This presents a significant challenge for AML compliance teams who must comply with the directive while protecting their client’s privacy.
To address this issue, financial institutions must adopt alternative methods to verify UBO, such as publicly available information and beneficial ownership registers. It is crucial for financial institutions to stay informed and seek guidance from AML technology providers, to ensure compliance with the latest regulatory requirements while safeguarding their clients’ privacy.
Vneuron offers innovative UBO verification solutions that utilize AI and advanced analytics to deliver precise and effective results. Our solutions include name screening and other AML modules that enable financial institutions to verify the owner’s identity and screen for any potential risks or red flags. UBO Screening against Adverse Media is also possible thanks to Vneuron platform’s easy integration with multiple public and private lists and other public registries when needed.

AI the ultimate trend in AML Compliance 2023

The use of AI is rapidly growing in the AML compliance landscape and continues to be a major trend in 2023. With the global AI in Fintech, market projected to reach $61.30 billion by 2031, growing at a CAGR of 22.5% from 2022 to 2031, it is clear that the financial industry is embracing AI technology. Thanks to its capability of high data volume processing and pattern detection, AI can help automate various AML modules such as KYC, transaction monitoring and screening, enabling compliance teams to detect and prevent financial crimes in real-time.

To fully utilize the power of AI in AML compliance, financial institutions should keep the following tips in mind:

  • Implement an end-to-end AML solution that can integrate with various systems and applications within the organization.
  • Ensure the accuracy and completeness of data used for AI analysis by implementing data quality controls and data governance processes.
  • Continuously monitor and update AI models to ensure they remain effective in detecting new patterns of financial crimes.
  • Train compliance staff to understand and use AI technology to enhance their AML compliance capabilities.
  • Conduct regular risk assessments and adjust AI models to ensure they are appropriate for the current risk profile.

At Vneuron, we will continue to innovate and enhance our AI-driven solutions to ensure our clients remain compliant and secure in an ever-evolving AML landscape.

Trade-based money laundering :

Trade-based money laundering (TBML) poses a significant threat to the financial industry, and it is imperative that AML compliance teams take proactive measures to prevent and detect this type of financial crime. The global financial system loses billions of dollars every year due to TBML, and if left unchecked, it can have devastating consequences for economies and societies worldwide.
A recent report by Global Financial Integrity found that TBML is estimated to account for over US$60 billion in global money laundering activities, highlighting the scale of the problem.

Financial institutions must prioritize TBML detection and prevention to avoid hefty fines, legal repercussions, and reputational damage. Advanced analytics and AI-driven solutions are critical for detecting and analyzing large amounts of trade data in real time to combat TBML effectively. In 2023, TBML is expected to be a major concern in AML compliance, and financial institutions must take action to protect themselves and their clients.

As we wrap up our discussion on AML compliance trends for 2023, it’s important to keep in mind that the landscape of financial crime prevention is constantly evolving. Looking ahead to 2024, we can expect to see continued emphasis on technology and data-driven solutions in the fight against money laundering and other financial crimes. The use of advanced analytics and AI-driven technology will become even more critical for AML compliance teams, as financial criminals become more sophisticated in their methods.

We can also anticipate increased regulatory scrutiny and enforcement, particularly in relation to emerging financial technologies and virtual assets. This will require financial institutions to stay agile and adapt quickly to changing AML regulations and best practices.

At Vneuron, we remain committed to staying at the forefront of AML compliance technology and providing our clients with innovative solutions to meet their evolving needs.