According to a new study by Fact.MR, a market research and competitive intelligence provider, the global AI-based anti-money laundering (AML) solutions market is anticipated to add 8X value by 2031.
To strengthen the financial systems against money laundering, terrorist financing, and other financial crimes, artificial intelligence-based anti-money laundering (AML) compliance has been helping the financial system with its robust capabilities. AI-enabled AML technology compliance has changed dramatically with the addition of regulatory layers in the financial jurisdiction. Large and small banks are expected to spend 0.5% to 1.4% of their operating expenses on AI-based AML solutions.
Increasing anti-money laundering activities and the inability to track them is forcing regulators to fine financial institutions, owing to which, these institutions have increased their investments towards the same. Based on researches, American banks are spending nearly US$ 23.5 Bn, followed by European banks at US$ 20 Bn, every year on AML solutions.
Moreover, AI-based AML solutions are majorly used to monitor transactions, detect patterns, and inform management by generating a score of risk so that appropriate steps can be taken at right time. During FY2019 and FY2020, a lot of banks have fully adopted AI in their AML processes to avoid reputation risk and hefty penalties.
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Key Takeaways from Market Study
- Banks, as end users, capture nearly half of the global market share, and are set to create an absolute $ opportunity of more than US$ 25 Bn over 2021-2031
- Among the use cases, fraud, risk & compliance has been the fastest-growing segment.
- The Europe AI-based AML solutions market set to dominate in 2021, where Germany and France are set to acquire more than one-fourth market share and generate abundant revenue.
- The market in China and Thailand is expected to dominate Asia Pacific with more than one-third and one-sixth market share, respectively.
“High R&D on artificial intelligence to improve overall product quality and increase in fraudulent & money laundering activities are set to aid market growth over the coming years,” says a Fact.MR analyst.
What are the Use Cases of AI-based AML Solutions?
AI is a very vast technology that has tremendous proficiencies. AI is used in many areas of compliance such as risks, operations, etc. AI is one of the most crucial steps in the financial industry, which is being implemented in numerous processes such as transaction monitoring, transaction screening, risk scoring, financial crime pattern detection, etc.
Financial organizations are progressing by implementing artificial intelligence in AML solutions, which is improving the accuracy of detection by decreasing false positive indications. In turn, these improvements are protecting firms from huge fines and continuing to their high reputation in the market.
Which Region is Projected to Offer High Growth Opportunities for AI-based AML Solution Providers?
As reported by the U.S. Department of Treasury, extensive penetration of money laundering prevails, representing involvement of US$ 300 Bn generated by criminal enterprises.
USA has enacted multiple laws and regulations for money laundering at the federal and state level. The USA PATRIOT ACT was enacted after the 2001 terrorist attack, which assisted the already enacted Bank Secretary Act (BSA) to strengthen the AML compliance program. Primary causes for money laundering are attributed to easy accessibility of the financial system and trade-based money laundering.
Canada’s regime for anti-money laundering and anti-terrorist financing activities is controlled by the Financial Transactions and Reports Analysis Center of Canada (FINTRAC), which actively monitors activities of financial institutions, intermediaries, and participating member countries. This regional scenario presents higher implementation of AI-based AML compliance by the financial sector and legally associated other institutions, owing to the stringent regulatory framework.
The U.S AI-based anti-money laundering solutions market is projected to acquire more than 1/4 of the overall market share from 2021 to 2031.
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Competitive Landscape
The AI-based anti-money laundering solutions industry is fragmented in nature, where market leaders are dominating due to their global reach and funds. There are numerous new players who are also acquiring a share in the global market and challenging the big players.
Moreover, companies are dedicatedly focusing on geographical expansion, product up-gradation, and much more. Some of the recent developments of key AI-based AML service providers are:
- On 11th February 2021, Nice Actimize launched WL-X, its breakthrough, next-generation Watch List (WL) screening solution leveraging the power of artificial intelligence for superior data management, advanced screening capabilities, and frictionless customer on-boarding.
- On 29th April 2021, NICE Actimize and Refinitiv partnered to offer the NICE Actimize’s SURVEIL-X Holistic Surveillance Suite to the Asia Pacific market.
- On 22nd June 2021, ComplAdvantage added Know Your Business (KYB) data to create the industry’s first unified and most comprehensive data graph of individuals and business entities. KYB is the process to verify the identity and understand the risk of business customers, either before or during their on-boarding to a service.
- On 9th June 2021, Pega Systems partnered with WithYouWithMe, a tech organisation that is making talent more accessible globally, to provide free training to WithYouWithMe students to train up Pega certified professionals, ready to start work on projects that require the specific Pega qualifications in process automation to help fulfil the digital skills gap.
- On 29th April 2020, Temenos AG launched eight propositions – using innovative Explainable AI (XAI) and cloud technologies – to help banks in their immediate response to the COVID-19 crisis.
- On 24th February 2021, Ayasdi launched Sensa, a pioneering solution for AML and financial crime detection to thwart money laundering activities.
- On 27th April 2021, AI-based big data analytics provider ThetaRay as launched SONAR Solutions, an AML cross-border payments solution as a cloud-based service.
Many recent developments related to companies offering AI-based AML solutions have been tracked by the team of Fact.MR, which are available in the available in the full report.
Market Segments Covered in AI-based AML Solutions Industry Research
By End User
- Banks
- Insurance Companies
- Asset Management
- Money Service Businesses
- Securities
- Other FSIs
By Use Case
- Transaction Monitoring
- KYC (Know Your Customer)
- Fraud, Risk & Compliance
- Trade AML
- Capital Markets AML
- Correspondent Banking AML
- Fraud
- Credit Risk
- Crime Pattern Detection
- Risk Scoring Customers and Accounts
- Watch-List Screening
- Alert Management and Reporting
- Other Solutions
Key Insights Covered in AI-based AML Solutions Industry Survey:
- Market Estimates and Forecasts (2016-2031)
- Key Drivers and Restraints Shaping Market Growth
- Segment-wise, Country-wise, and Region-wise Analysis
- Competition Mapping and Benchmarking
- Market Share Analysis
- COVID-19 Impact on Demand for AI-based AML Solutions and How to Navigate
- Recommendation on Key Winning Strategies
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