Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- The financial crime landscape is evolving rapidly, driven by a combination of technological, geopolitical, economic, and regulatory factors.
- Regulators are expected to introduce more stringent measures to address growing threats posed by emerging threat vectors.
- To stay resilient, financial institutions should update their compliance framework, embrace technology advancements, improve data governance, and boost cybersecurity measures.
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The constancy of change
The financial landscape undergoes continuous transformation in response to geopolitical shifts.
The regulatory framework governing financial crime is no exception. Every time a threat vector emerges, substantial changes in the regulatory landscape are anticipated that require a rethink of the risk management practices and compliance requirements of institutions.
Concurrently, market events such as the proliferation of cross-border transactions and technological advancements – the latest being a whole lot of activity in the AI space – present both opportunities and challenges for financial services organizations.
We examine some of the anticipated financial crime-focused regulatory changes and market trends, assess their potential impact on risk management frameworks, and outline the strategies financial institutions should adopt to keep financial crime at bay and maintain robust compliance while optimizing operational efficiency.
New regulations on the horizon
In 2025, global regulators are expected to implement stricter regulations to combat emerging financial crime threats.
Not only that, but we also expect industry watchdogs to either introduce new or strengthen existing requirements for the utilization of advanced technologies.
Going by emerging trends in the financial crime space and the response to those by the regulatory authorities, we have arrived at an indicative list of regulatory changes anticipated in 2025.
The UK is expected to implement several regulatory amendments significantly impacting financial crime compliance.
Enacted in October 2023, the Economic Crime and Corporate Transparency Act aims to enhance corporate transparency and fight economic crime. Its provisions, implemented progressively through 2025, include requiring individuals incorporating new companies to provide identification if they’re directors or significant controllers to prevent the registration of entities under fictitious names, thereby reducing opportunities for fraudulent activities.
The Financial Conduct Authority expects to strengthen compliance with the Consumer Duty standard, requiring firms to act in good faith for retail customers. This will involve establishing or improving effective anti-fraud measures, with close monitoring and potential interventions or sanctions for non-compliance.
In 2025, the UK’s approach to combating authorized push payment (APP) fraud will be shaped by regulatory changes. The Payment Systems Regulator (PSR) has introduced a mandatory reimbursement framework for APP fraud victims and empowered payment service providers to delay outbound payments with reasonable grounds to suspect fraud. As these regulations have been in place since late 2024, 2025 will focus on the practical application and potential refinement of these measures.
2025 is expected to mark a critical juncture in combating financial crime across the EU member states.
The sixth iteration of the Anti-Money Laundering Directive will come into full effect, emphasizing personal financial institution responsibility with stricter sanctions for non-compliance. The directive also led to a centralized AML authority (AMLA) being established to oversee enforcement consistency and harmonize standards across member states, improving cooperation and information sharing.
The Digital Operational Resilience Act, that has become fully applicable in January 2025, will intersect with financial crime frameworks as cyber threats become more significant.
The Payment Services Directive 3, replacing PSD2 in 2025-2026, will focus on enhanced consumer protection and security, potentially extending biometrics and multifactor authentication.
The EU Al Act ensures safe and ethical AI practices, influencing financial crime frameworks with transparency, accountability, and fairness standards. Throughout 2025, EU institutions will develop guidelines for practical implementation, including a comprehensive list of AI use cases.
In 2025, the full impact of the Markets in Crypto-Assets Regulations, which complement existing AML and CTF frameworks by mandating enhanced transparency for cryptocurrency asset transactions and introducing a risk-based compliance approach, will become visible, leading to greater cross-border cooperation on crypto-related financial crime and increased adoption of regulated crypto assets by financial institutions.
In the United States, the Financial Crimes Enforcement Network (FinCEN) is expected to intensify focus on beneficial ownership registries and AI in transaction monitoring.
Regulatory actions in 2024 indicate a focus on improved information sharing and stricter compliance requirements. The increasing integration of cryptocurrencies with the financial system is also expected to prompt heightened regulatory attention. Conversely, we also anticipate a potential reduction in banking regulations given the new administration.
In Latin America, governments are implementing measures to combat financial crimes associated with organized crime and corruption. Countries like Brazil and Mexico are enhancing regulatory frameworks for fintech companies and virtual assets, reflecting a regional commitment to integrating innovation with security.
In 2025, regional collaboration will be key in this part of the world, driven by the FATF and regional organizations like the Asia/Pacific Group on Money Laundering.
China and India intend to tighten cross-border regulations, cryptocurrency exchanges, and digital payments.
Singapore and Hong Kong, as financial hubs, plan to increase expectations for compliance with advanced technologies like blockchain analytics and AI-driven risk assessment.
Market developments propelled by technology
The 2025 financial crime landscape will be significantly influenced by ongoing rapid technological advancements and evolving economic dynamics.
Artificial intelligence (AI) will continue to revolutionize financial crime detection and prevention. AI-driven tools will further enhance the accuracy and efficiency of risk monitoring, enabling real-time risk assessment. Concurrently, the integration of AI will present ethical and operational challenges, necessitating prompt and comprehensive regulatory redressal.
Simultaneously, technological advancements will facilitate more sophisticated financial crimes. Generative artificial intelligence (GenAI) has already enabled scammers to create highly convincing fraudulent content. The proliferation of cryptocurrencies also presents opportunities for fraudsters to exploit this trend through various schemes. With the widespread adoption of applications for banking, shopping, and social interaction, fraudsters are concentrating their efforts on exploiting vulnerabilities within these platforms, too.
The escalating cybercrime landscape, propelled by sophisticated ransomware attacks and phishing schemes, necessitates enhanced cybersecurity measures for institutions. The convergence of financial crime and cyber risk underscores the imperative for integrated approaches that comprehensively address these interconnected threats.
Geopolitical developments will continue to be significant drivers of financial crime risks. The ongoing fragmentation of global alliances has resulted in increasingly intricate and overlapping sanctions programs. Financial institutions must navigate this challenging environment by ensuring their financial crime controls are robust and adaptable.
Seven headline thoughts
We outline seven headline thoughts for financial crime leaders to keep front of mind in ensuring their frameworks remain robust and resilient.
This entails segmenting customers, transactions, and geographies into risk tiers and tailoring controls accordingly. By focusing on high-risk areas, institutions can optimize their resource allocation and mitigate the overall compliance burden.
Financial institutions should ensure they have standalone risk assessment frameworks for core regulatory regimes such as fraud or AML. Additionally, they should incorporate emerging risks and ensure that risk assessments inform resource allocation and system configuration.
This includes providing regular training to increase awareness and understanding of emerging threats and regulatory requirements. Clear accountability structures and robust reporting mechanisms are essential to maintaining a culture of compliance.
Financial institutions must invest in advanced analytics tools to enable real-time monitoring and predictive modelling – and in robust data infrastructure that supports real time data sharing through integration of beneficial ownership registries and other data exchange platforms.
It would be wise to monitor the performance of AI models and address potential biases before they result in inadvertent errors and potential losses. Regular audits and validation processes are necessary to maintaining trust in AI-driven systems.
This involves adopting a proactive approach to cybersecurity, such as conducting regular vulnerability assessments, implementing multi-factor authentication, and training employees to recognize phishing attempts. Cyber resilience also requires close collaboration between AML and IT teams to ensure that cybersecurity measures are seamlessly integrated into the broader financial crime framework.
Financial institutions must prioritize workforce upskilling to navigate the evolving regulatory and market landscape. This includes training compliance teams in advanced analytics tools, regulatory updates, and emerging financial crime typologies. Establishing a culture of compliance is equally important. Senior leadership should lead by example, fostering an environment where ethical practices and regulatory adherence are deeply ingrained in organizational values.
Adapting frameworks to stay ahead
In response to anticipated regulatory changes and market developments, financial institutions must reevaluate and adapt their financial crime operating models.
The financial crime landscape in 2025 is characterized by progressing evolution of the regulatory requirements and heightened regulatory scrutiny, rapid technological advancements, and complex market dynamics. Financial institutions must closely monitor the changing regulatory landscape and readily adopt technology-driven operating models to effectively address both traditional and emerging financial crime risks.
Key regulatory changes, like the implementation of the EU's AMLA and the expansion of FinCEN's beneficial ownership requirements, will require financial institutions to invest in data integration and transparency initiatives. Simultaneously, geopolitical developments and advancements in AI are reshaping the risk landscape.
To remain compliant and resilient, financial institutions should ensure their financial crime compliance frameworks remain up to date. They should prioritize the development of integrated, agile, and technology-enabled frameworks that can effectively address the shifting threat landscape. Financial institutions should look at adopting a risk-based approach to the full extent, embracing AI and automation, strengthening data governance, and enhancing cyber resilience. Additionally, they will have to upskill their workforce and establish a collaborative work environment.
A robust compliance program remains essential to ensure ongoing alignment with global and local requirements and adequate risk coverage.