Reasons to be fearful – and cheerful – about the state of financial crime in 2024

The advent of a new year can prompt dread and excitement – some brace for another 12 months of bad news, while others are excited about the possibilities ahead. As a compliance industry veteran, experience tells me a little of each is helpful. While we shouldn’t be complacent about the challenges we’ll face this year, there are reasons to believe the fight against financial crime will improve in 2024. 

Reasons to be fearful

The convergence of cybercrime and money laundering

Cybercrime is anticipated to cost $9.5 trillion in 2024, with our latest State of Financial Crime survey revealing that cybersecurity is now a major focus for financial institutions. 87 percent of firms are hiring new staff to handle the increasing number of cybersecurity threats, 86 percent are investing in new technology to combat rising cybersecurity threat instances, and 87 percent of organizations are reallocating resources to focus on cybersecurity. 

What’s more, privacy-enhancing technologies (encrypted messaging apps, dark web marketplaces, and digital assets) will continue to protect the identity of criminals and allow for increased collaboration. Data volumes continue to increase, with 100 zettabytes of data stored in the cloud worldwide by 2025. By 2027, the number of connection points across the Internet of Things will almost double to 29 billion, generating “almost unlimited” digital attack surfaces that criminals can use to launch ransomware, identity, or data theft strikes. By 2031, ransomware victims will lose $265 billion, with attacks expected every two seconds. 

The metaverse is another frontier that criminals could exploit with concerns around privacy and security being compromised, such as biometric data, manipulation through avatars, the theft of virtual property, and human-like interaction that could lead to fraud, scams, and radicalization.

A PEP avalanche is coming

More than 40 countries will hold elections in 2024, including the United States, India, and the United Kingdom. This will make the politically exposed person (PEP) environment even more complex, as allegations of corruption, money laundering, and judiciary intervention could emerge as part of political posturing. The electoral results could have implications for sanctions and, in some cases, either strengthen or weaken the resolve of countries to tackle illicit financial flows. Our survey showed firms are braced for a year of uncertainty. 61 percent of compliance leaders said they plan to become more risk-averse when managing PEPs over the next 12 months. 73 percent also said they would need to reduce their reliance on manual screening processes, indicating potential technological hurdles firms need to overcome before election season ramps up. 

Reasons to be cheerful 

Fighting financial crime with AI

While much has – rightly – been written about the risks of AI-based technologies, overall, we can be optimistic about their potential to make financial crime fighting more efficient and effective. AI is increasingly deployed in solutions such as customer onboarding, adverse media and sanctions screening, transaction monitoring, and automated reporting to regulators. AI-based solutions can reduce false positives, enrich customer data, and identify new risks. On a global basis, the AI market was anticipated to reach US$241.8 billion by the end of 2023. In areas where concerns remain, like explainability, regulators increasingly look to those using or providing AI models to have clear and understandable information on the AI model’s capabilities and limitations and transparent and traceable decision-making processes. With a wide range of legislation likely to be implemented in 2024, firms will also likely receive greater clarity on policymakers’ expectations. 

Real-time payments adoption is growing

One area where continued financial services innovation is most visible is real-time payments. Open banking, contactless payments, digital wallets, buy-now, pay later (BNPL) schemes, and digital currencies are all improving the customer experience. While these services create significant challenges for financial crime compliance, their net benefit for consumers is positive. Open banking continues to take the world by storm through application programming interfaces (APIs) to share data between financial institutions and third-party service providers to make instant (real-time) payments. Over 60 countries have introduced an instant payment system based on different models, such as centralized or decentralized APIs, with varying degrees of regulatory involvement. In our global survey, 46 percent of organizations shared that they were already part of a real-time payments program, with an additional 44 percent indicating that they have plans to join a real-time payments program. 

The State of Financial Crime 2024

Download our roadmap for the year ahead, built on a survey of 600 financial crime leaders and insights from our regulatory affairs experts.

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