New insights from a recent McKinsey & Company report reveal a troubling trend in the financial industry: despite significant investments in compliance, institutions are only able to detect a mere 2 percent of global financial crime flows. This statistic comes at a time when spending on compliance, particularly in know-your-customer (KYC) and anti-money-laundering (AML) initiatives, has surged by as much as 10 percent annually in some advanced markets from 2015 to 2022. The report suggests that the implementation of a new type of technology, termed agentic AI, could be the key to addressing these long-standing challenges.
Agentic AI represents an evolution of traditional analytical AI, offering enhanced automation and productivity throughout the client life cycle. As financial institutions grapple with KYC and AML processes, the report emphasizes that agentic AI could streamline operations significantly, improving both the quality and speed of risk assessments.
The McKinsey report also highlights that while banks globally are pouring resources into KYC and AML efforts, the return on investment remains disappointing. With the overwhelming majority of illicit financial flows going undetected, it becomes crucial for these institutions to explore innovative solutions like agentic AI.
One of the significant advantages of agentic AI is its ability to automate complex tasks, thereby reducing manual workloads. The report provides an example of a multilateral development bank experimenting with generative AI tools. These tools can locate credit assessment documents, read and synthesize the information, and draw conclusions, thus enhancing decision-making processes.
In addition to agentic AI, the report sheds light on the transformative potential of generative AI in the financial sector. It identifies three core capabilities offered by this technology: concision, which aids in summarizing extensive datasets; content generation; and improved customer engagement via AI-powered bots that assist relationship managers. Among these capabilities, concision is witnessing rapid adoption, with numerous surveyed institutions testing generative AI in areas such as early-warning systems and credit decisions.
To facilitate wider adoption of generative AI, a significant number of banks are actively strengthening their technological foundations. The report states that approximately 87 percent of surveyed institutions are hiring technology experts, while 60 percent are training their leadership teams on the applications of generative AI.
Moreover, several banks are establishing centers of excellence to develop and maintain the architecture necessary for deploying generative AI. They are also creating frameworks to ensure safe implementation while managing the associated risks. On the technology front, 31 respondents indicated they are working on developing secure environments and sandboxes for experimentation, while others are organizing workshops and engaging external experts to set up governance frameworks that balance innovation with risk management.
Preparing for a New Era of AI Adoption
The report concludes with a strong message: while AI offers transformative potential for the banking sector, the actual impact will depend on how effectively institutions prepare for its large-scale deployment. The pressing issue remains that despite substantial investments, the financial sector is still not detecting the majority of financial crimes. Therefore, the integration of advanced AI technologies, particularly agentic and generative AI, may hold the key to overcoming these challenges.
The road ahead is one of cautious but optimistic transformation, where banks must not only adopt cutting-edge technologies but also rethink their operational strategies to leverage the full potential of AI. As the industry evolves, it will be vital to monitor the developments in AI adoption and its effectiveness in combating financial crime, thus ensuring a more secure financial landscape for all.
