Tightening regulations cited as driver to growing AML market

Having reached 1.63 billion USD in 2021, analysists at Emergen Research say the forecast trend is largely down to increasingly stringent government regulations, putting pressure on organisations to deploy AML solutions in a bid to monitor and report suspicious activity.

Strict regulations are required as compliance reduces the chances of criminal conspiracy, which results in reduced risk of money-related crimes such as terrorism financing, corruption, and money laundering.

In addition, increasing instances of financial fraud have resulted in adoption of regulations from different regulators, which include The Financial Industry Regulatory Authority (FINRA), China’s Banking and Insurance Regulatory Commission (CBIRC), and Australian Transaction Reports and Analysis Centre (AUSTRAC).

However, non-compliance to regulations can lead to heavy fines on the non-compliant parties. Tightening government compliance and regulation frameworks, as well as instructions to financial institutions to adopt AML solutions such as Know Your Customer/ Customer Due Diligence (KYC/CDD) are helping to ensure that customers are not involved in money-related crimes.

However, high initial cost associated with deployment of AML solutions is a major factor expected to hamper revenue growth. AML software detects any unusual financial activity and implements laws to combat illegal transactions. AML process involves transaction monitoring, Know Your Customer (KYC), and currency transaction reporting, among others.

Additionally, even after adopting AML solutions, it can be difficult to detect fraud in some cases. In such situations, financial institutions consolidate KYC data using a variety of methods and technologies in order to increase data quality. Furthermore, financial institutions hire external consulting firms to examine customer data more thoroughly, which costs relatively more than the regulatory fines.

The COVID-19 pandemic had a positive impact on the global AML software market, in particular regarding in provocation of a quick increase in online sales and an increase in the use of online payment options.

Rises in the use of non-cash payments such as mobile payments, online payments, and use of prepaid cards have increased the chances of fraudulent money transactions, which is driving demand for AML software among financial institutions.

In addition, increasing number of online scams involving medical supplies, personal protective equipment, essential items, and illegal activities in terms of Covid-19 donations are expected to increase adoption of AML software.