Oct 10, 2025

October 10, 2025 Many financial institutions across the US are rethinking how they tackle financial crime, driven by the rising cost of compliance, new regulatory demands, and evolving digital threats. A recent joint report by Hawk and Celent, Trends in AML & Fraud Convergence in US Mid-Market Banks & Credit Unions, explored why so many banks and credit unions are converging their anti-money laundering (AML) and fraud prevention programmes to achieve greater efficiency and resilience. According to Hawk, one of the strongest catalysts for this shift is the need to contain costs. According to LexisNexis’ True Cost of Compliance report, 78% of smaller financial institutions reported higher labour-related compliance costs. By merging their fraud and AML functions and using advanced technology, firms can cut duplication, streamline processes, and operate more cost-effectively. AI and automation are now viewed as essential tools for reducing false positives and minimising manual workloads, while unified, cloud-based systems offer scalability without inflating costs. The report also highlights how criminal innovation is outpacing legacy technology. Germany’s Financial Intelligence Unit (FIU) reported an 8.2% rise in crypto-related AML alerts in its 2025 review, representing 3.3% of all suspicious activity reports. These figures underscore the urgent need for real-time, adaptive defences that can keep up with modern financial crime. Almost half (47%) of surveyed firms said that upgrading to dynamic, real-time AML and fraud tools is critical to staying ahead of evolving threats. However, balancing robust security with customer experience remains a key challenge. Outdated fraud systems can increase friction, frustrating legitimate customers through unnecessary checks or blocked transactions. Firms that manage to protect users while offering seamless experiences will gain a competitive advantage, particularly as the financial landscape becomes increasingly digital. The rise of embedded finance, instant payments, and neobanks is also transforming compliance priorities. Embedded finance is projected to triple to $250bn by 2029, while instant payments grew 40% in a single year. Neobanks’ market value could hit $2tn by 2030, growing over 50% annually. This digital boom is forcing 40% of institutions to revisit their AML strategies, paving the way for agile, technology-driven compliance frameworks. At the same time, rising crime volumes are straining already stretched compliance teams. Many organisations are under pressure to enhance detection capabilities without inflating budgets, making scalable, automated systems no longer optional but essential. Regulatory complexity remains another critical factor. One-third of respondents said adapting to shifting regulatory expectations is a primary driver for revising their anti-financial crime (AFC) strategies. This aligns with ACAMS’ 2024 findings, which showed that 68% of US institutions struggle to interpret and implement new FinCEN and federal guidance. The constant pace of regulatory change is compelling firms to adopt technology that ensures continuous compliance and audit readiness. Customer friction extends beyond fraud systems into AML processes as well. Intrusive onboarding, extensive KYC checks, and transaction freezes can erode trust. Integrating AML systems to ensure smoother data sharing across departments can help reduce these pain points while maintaining strong compliance standards. Finally, innovation and AI have become non-negotiable. A quarter of institutions cited new AFC technology as a driver of transformation. From traditional AI to generative and agentic AI, technology is revolutionising compliance operations—boosting accuracy, reducing costs, and enabling financial institutions to adapt to an ever-changing threat landscape.