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Deregulation: Friend or Foe of Innovation?
In the research for the Napier AI / AML Index 2025-2026, we uncovered a real divergence in regulatory strategies around the world. Some markets seek to improve anti-money laundering (AML) outcomes through more stringent and explicit mandates, while others have pursued a policy of simplification or even deregulation in an effort to reduce tick-box-compliance and free up financial institutions to drive down financial crime.
Regulating AI in AML
The challenge with regulating for new technology applications, such as AI for AML, is keeping pace with the possibilities and ensuring responsible innovation. But at the same time, criminals are not limited by regulation, and adopt these technologies at speed for nefarious schemes. The sheer volume of global regulatory updates demonstrates the challenge of protecting economies and societies as the pace at which organised crime invents new schemes continues to quicken.
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Regional Approaches to AI/AML Regulation
The AI / AML Regulation score with the Index quantifies financial crime professionals’ views on AI usage and the role of regulators in the region, specifically whether they see regulation as a positive force in improving AML outcomes, and its impact on the total cost of compliance.
Europe
The Pan-European approach has been highly regulated environment, but it has become a case study in the pitfalls of being overly prescriptive when it comes to technology. Respondents were cautiously optimistic about deregulation in Europe, with a focus on harmonisation through new bodies like EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), to create consistency and close loopholes. The belief in this approach is evidenced in the great improvement in the regional AI / AML Regulation score.
APAC
Without a single, unifying regulatory body to harmonise supervisory frameworks, the maturity and adoption of AI for AML varies across the AsiaPacific region. But regulation is broadly viewed as an enabler of responsible innovation in APAC, not a constraint. Domestic appetites differ between oversight for AI generally and specific initiatives to bring automation to AML. Engagement with global bodies including Financial Action Task Force (FATF) will ensure that no market is left behind. The benefits of industry / regulator collaboration can be seen in the significant improvement on the regional AI / AML Regulation score, which could be bettered further with a more regional lens to combatting financial crime.
North and Latin America
Risk appetites and governmental priorities vary across the region, with Latin American giants like Brazil leading digital progress including AI oversight of new fintech innovations. Varying complexity and fragmentation of supervisory bodies and regimes is a clear theme across the Americas, with little harmonisation on the agenda, perhaps explaining why it is the only region with a worsening year-on-year AI / AML Regulation score.
MENA
The Middle East indicated that regulation is regarded as a constructive force, with active collaboration between regulators and financial institutions ensuring agility and effectiveness. Middle East and Africa stands out for its incredible leap-forward in AI / AML Regulation score, evidencing the significant efforts that have been made there to improve after disappointing FATF mutual evaluations of the past. The centralised focus on AI is clear. Although its application to financial crime compliance is nascent, there appears to be significant appetite to deliver the benefits in region.
AI / AML Regulation Leaders
United States
While the US has a reputation for a broadly deregulated approach, respondents in the research actually indicated that sentiment leans toward stronger regulation as necessary for innovation, rooted in trust.
United Kingdom
The UK has been ahead of its European neighbours on the deregulation approach, focusing on unifying oversight and refocusing regulators on encouraging innovation. New initiatives like the FCA Live AI Testing and Supercharged Sandbox, are clear signals of the UK’s desire to cement its financial hub status as one of secure innovation.
Australia
Australia’s expansion of its AML scope to new sectors is seen as positive modernisation.
China
Tougher regulatory scrutiny has increased institutional integrity and transparency, reinforcing trust in the system.
United Arab Emirates
The UAE is seen as aiming for the right balance between regulation and innovation, with a leading score in in AML Attitude and AI / AML Regulation. But its bottom ranking for AML Effectiveness would suggest that the approach has yet to prove out in AML outcomes.
While the strategies of regional and domestic regulators may differ, the goals remain the same: to reduce illicit flows in economies and stamp out financial crime. The close the relationship between AML Attitude and AI / AML Regulation scores the better the nation performs in terms of AML Effectiveness, showing that provision for AI within AML regulatory frameworks is an important factor in delivering these outcomes.
Dive into the regulatory insights from the Napier AI / AML Index 2025-2026
