A snapshot of the United Kingdom approach to AI in AML regulation in 2024

Index score 2024-2025: 4.48 ‍

‍Index score between 0-10, with a lower score reflecting a more efficient and innovative regulatory approach.

The Index combines four weighted category scores, AML attitude, AI/AML regulation, total cost of compliance, and AML effectiveness, to produce an overall score (where lower is better) that measures each nation's balance between anti–money laundering (AML) efforts and outcomes, while also estimating the potential uplift from AI-driven AML improvements.

The Index is designed to pinpoint what good looks like in the careful balance between efficiency and effectiveness in Anti Money Laundering. The Index, like Napier AI itself, is designed by data scientists (including me) and built on data science. It is designed to illustrate the art of the possible for AML and AI, by highlighting national regimes and financial services markets that are achieving great AML outcomes through innovations in AI.

Click here to read it: Napier AI / AML Index.

The UK generally takes a pro-innovation stance to AI in contrast to its EU and US counterparts who adopt more prescriptive legislative measures. Having hosted the world’s first AI Safety Summit in Bletchley Park in 2023, the UK government followed up with a consultation response on regulating AI in February 2024. The response aims to balance innovation and safety but delays legislative action in favour of better understanding risks and challenges, with no tangible requirements yet.

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Despite the pro-innovation approach from the UK government, regulator and enforcement bodies, financial institutions are only just starting to use AI and there is some hesitancy around implementation and best practices. Additionally, there has been a bigger focus in recent years on banks over other financial firms and fintechs.

In the next 12 months, we may see a more legislative approach towards AI from the UK, following in the footsteps of the EU’s AI Act. More explicit guidance on AI’s usage could encourage more adoption in the financial services sector. The new government has shown a greater willingness to intervene to facilitate the technology’s development.  

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The market’s financial services regulator, the Financial Conduct Authority (FCA) takes a similar stance to AI. In its AI Update published in April 2024, the FCA emphasised the importance of transparency and explainability. It also sees potential in synthetic data’s possibilities to benefit innovation in fighting financial crime, and so has set up the Synthetic Data Expert Group to explore its opportunities and challenges.

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As a large financial hub, the UK has a higher risk exposure to financial crime, nevertheless it successfully protects a large amount of GDP from flowing into the black market. The low cost of financial crime compliance coupled with its high compliance scores illustrate the benefits of a regulatory environment that balances risk with innovation. The UK should focus next on AI implementations across the industry, beyond just traditional banks.

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“The UK and Singapore are leading the way in AI-driven anti-money laundering (AML) innovation, balancing regulatory oversight with technological advancement. Both countries are setting global standards by adopting agile, scalable AI systems that enhance compliance, mitigate financial crime risks in booming financial hubs, and support sustainable growth in the evolving digital economy. From the evolving AML typologies to the changing regulatory frameworks, and ever-changing watchlists, the lesson from these trailblazing markets is clear: the key for successful implementation for AML is a collaborative regulator and an innovation-friendly approach.” to Ben Goodwin, Head of Financial Services – APAC, UK Department for Business and Trade

“In the UK, many firms benefit from the outcomes-focused approach of the Financial Conduct Authority (FCA) while adopting advanced AI capabilities in their screening, monitoring and Know Your Customer/ Customer Due Dilligence (KYC/ CDD) processes. This is particularly true for smaller firms which aren’t plagued by legacy systems or data quality issues. Although clouded by regulatory uncertainty regarding data sharing, AI adoption is being heavily explored, especially in screening processes.” Annegret Funke, Senior Manager PwC UK  

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Napier AI recently responded to the FCA AI Lab’s questionnaire on the risks, opportunities, benefits, and threats of using artificial intelligence for financial crime compliance. We discuss the barriers to adopting use cases and implementing AI, the current state of regulatory guidance, and the need for partnerships for effective anti-money laundering programs.

Read the regulatory response

Read about Napier AI’s synthetic data partnership with the FCA  

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