Asian banks face rising crime threat due to low AI use

A new report by SymphonyAI and Regulation Asia highlights a significant gap in the adoption of artificial intelligence among financial institutions in Asia, exposing them to increased risks of financial crime.

The report, titled "Untapped Potential: AI-enabled Financial Crime Compliance Transformation in Asia – Maturity, Applications, and Trends," surveyed 126 practitioners from financial institutions across the Asia Pacific region.

It revealed that over 50% of these institutions are not employing AI in anti-money laundering (AML) processes, despite acknowledging its effectiveness.

The reluctance to integrate AI comes amid a growing threat of financial crime in the region. According to Moody's, incidents of money laundering in Southeast Asia increased by 64% from 2018 to 2023, with countries like Thailand, Singapore, Malaysia, Indonesia, and the Philippines being the most affected.

Gerard O'Reilly, Managing Director of APAC, Financial Services at SymphonyAI, emphasised the gap in the global adoption of AI. He stated, "Financial institutions worldwide who have adopted predictive and generative AI-powered AML have seen transformational results in productivity, accuracy, and speed, yet Asian financial institutions lag their counterparts elsewhere in embracing these critical technologies."

The survey identified key challenges hindering AI adoption, with 58.6% of respondents pointing to issues such as integrating AI with existing systems and managing data quality.

Challenges such as model explainability and data privacy were also highlighted, with 46.6% and 43.1% of respondents citing these as concerns, respectively. Differing regulatory standards across markets further complicate the integration process, with 37.9% mentioning compliance as a significant challenge.

Despite these challenges, there is optimism among leaders in financial institutions. The report notes that 40% of respondents see senior management as the primary advocates for AI adoption. However, demonstrating the value of AI in reducing false positives and improving efficiency remains crucial for securing investment at the board level.

Bradley Maclean, Co-Founder and Head of Research at Regulation Asia, remarked on the gap between AI's potential and its implementation. "Asian financial institutions recognize the potential of AI for fighting financial crime, but our research shows a significant gap between ambition and action. The cost of inaction is rising rapidly. Financial institutions that delay AI adoption risk not only financial losses but also reputational damage and increased regulatory scrutiny," he said.

The study underlined the importance of AI in areas like transaction monitoring, with 78% of respondents prioritising it for deployment. AI's ability to process large data sets to uncover suspicious activities is deemed crucial in financial crime compliance. The technology is also being leveraged for Know Your Customer (KYC) processes and sanctions screening.

Craig Robertson, Financial Crime Subject Matter Expert at SymphonyAI, stated, "In the fight against financial crime, especially in APAC, AI is helping financial institutions move from defence to offence. AI is delivering both efficiency and effectiveness. Financial institutions are using AI to detect new crime more effectively, reduce costly false positives, and control spiralling operational expenses."

The report provides a roadmap for financial institutions in Asia to harness AI effectively. It recommends starting with small-scale implementation, fostering collaboration between institutions, technology providers and regulators, and ensuring strong governance and leadership support to ensure AI's potential is realised in combatting financial crime.