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Historically, anti-money laundering (AML) compliance efforts were primarily focused on retail and commercial banking. Today, capital markets are increasingly coming under regulatory scrutiny, especially in the Middle East region.
The challenges of AML compliance for capital markets
- Capital markets process thousands of transactions per second, particularly in equities, derivatives, and foreign exchange (FX). These transactions often involve complex ownership structures, cross-border dealings, and layered instruments such as derivatives and structured products, making it challenging to trace the ultimate beneficial owner (UBO) or the source of funds.
Money launderers exploit these complexities through sophisticated typologies, including:
- ‘Free of payment’ asset transfers, where securities are transferred without a corresponding transfer of funds.
- Mirror-trading through central markets or off-market channels.
- Non-standard settlement arrangements.
Traditional AML screening methods may struggle to keep pace with the speed, scale, and complexity of these transactions, potentially resulting in missed red flags. The sheer volume of alerts can also overwhelm compliance teams and delay legitimate trading activities.
- Regulatory frameworks in the region are continually evolving. The Kingdom of Saudi Arabia’s new rules and guidelines on Ultimate Beneficial Ownership underline the region’s commitment to international best practices and corporate accountability. Having been effective from April 2025, these regulations mandate that all companies in Saudi Arabia (unless exempted) disclose and maintain accurate information about their UBOs in a newly established register with the Ministry of Commerce.
- Adding to the complexity, in a recent significant move, the Capital Markets Authority (CMA) in Saudi Arabia now allows foreign investors to invest in Saudi-listed companies owning real estate in Makkah and Madinah. This policy change has stimulated new investments, enhancing competitiveness and attractiveness, and leading to a surge in cross-border transactions.
Many capital markets firms continue to rely on outdated compliance tools that are not designed for real-time, high-frequency trading environments. Modernising these systems to handle AI-driven, contextual, real-time screening is both costly and complex.
How can NextGen AML technology help?
Legacy screening systems often fall short in capital markets environments, where trades happen at extreme volumes and involve complex counterparty structures. Next generation AML technology is designed to address these exact challenges.
The Napier AI / AML Index found that Saudi Arabia could potentially save more than half of its compliance costs by adopting AI-powered compliance solutions. For capital markets firms, this translates into faster, more accurate screening — even across high-frequency trading, derivatives, and cross-border flows.
Napier AI’s platform combines advanced screening techniques, including fuzzy matching, contextual risk scoring, and real-time configuration — to drastically reduce false positives without slowing down operations. This is especially critical when screening transactions that involve layered instruments or newly regulated investor profiles, such as foreign investments in Makkah or Madinah real estate.
Unlike traditional systems, our platform learns continuously from analyst feedback. This means alert quality improves over time, enabling transparent, risk-based decisions that evolve with real-world input. Screening rules can be customised to reflect different jurisdictions, counterparties, or asset classes — allowing firms to stay compliant with UBO disclosure requirements while maintaining operational speed.
Real-time screening for real-time operations
Capital markets firms operate in one of the most complex, high-speed environments in financial services — processing thousands of trades per second across asset classes and jurisdictions. Traditional tools can’t keep pace with this velocity, nor the regulatory requirements that come with it.
Real-time multi-configuration screening provides substantial advantages for capital markets firms by enabling the application of tailored screening rules across various business lines, jurisdictions, and counterparties simultaneously. This ensures stricter controls where needed — such as foreign investors in real estate or trades involving complex UBO structures — while applying lighter-touch screening to low-risk segments. The result is precise detection without slowing down operations.
- Enhanced efficiency and accuracy: Automated screening solutions utilise advanced algorithms to quickly scan large volumes of data, improving the efficiency of the screening process and reducing the risk of false positives and negatives.
- Improved risk management: By automating the screening process, organisations can ensure a more consistent approach to identifying and managing sanctions risks, adapting to varying regulatory requirements across different jurisdictions.
- Real-time monitoring and alerts: Modern screening technologies offer real-time capabilities, allowing organisations to monitor transactions and entities proactively, ensuring timely identification and mitigation of potential risks.
- Operational efficiency: Automated sanctions screening processes streamline compliance efforts, reducing manual errors and operational costs, thereby allowing businesses to focus resources on core activities.
By screening in real-time, firms can detect potential risks immediately at the point of trade, regardless of the complexity or diversity of their operations. This proactive approach ensures a more agile, risk-sensitive compliance framework that reduces false positives, maintains regulatory alignment across geographies, and supports efficient, uninterrupted trading activities.
See how Saudi Arabia ranks in AML performance and AI adoption compared to its peers in the region: Napier AI / AML Index
Photo by Denise Chan on Unsplash
