Unearthed Risks, Local Repercussions: Recent Industry Survey Reveals Mid-Sized and Community U.S. Banks Facing Increased Financial Fraud
In a landmark report by Quantexa, a leading global provider of financial crime solutions, the adoption of AI and real-time monitoring is encouraged for mid-size and community banks. The report underscores the need for these institutions to modernize their outdated systems, a call that resonates with AML professionals who point to fragmented data and the inability to monitor risks in real time as pressing issues.
Mid-size and community banks face regulatory expectations similar to large banks, yet they often operate with fewer resources, leaner teams, and older technology. This disparity can lead to inefficient investigations and high false positives, straining scarce resources. However, Chris Bagnall, Head of Financial Crime Solutions for North America at Quantexa, sees a critical opportunity for these banks to harness better data and AI to protect the communities and businesses they serve.
The report identifies AI, real-time monitoring, and interbank collaboration as the most promising ways to modernize AML programs. Nearly 93% of respondents consider interbank collaboration under Section 314(b) of the USA PATRIOT Act critical to improving detection of illicit activity.
Legacy technology, poor data quality, and limited AI/ML adoption persist as challenges for AML professionals, with 47% of respondents citing outdated systems as their biggest barrier. Unclear guidance around emerging technologies like AI hinders innovation and adoption in 45% of banks.
Despite these challenges, 94% of AML professionals express confidence in their ability to detect emerging threats, emphasizing the importance of contextual data for strengthening detection capabilities. The report suggests that mid-sized and community banks can close these gaps by applying better data, contextual insights, and AI solutions.
The survey involved 200 anti-money laundering professionals at US mid-size and community banks. The report also emphasizes the need for collaboration across institutions and with regulators to share intelligence and help shape expectations around emerging technologies.
In conclusion, the report advises mid-size and community banks to invest in their people and processes to build sustainable expertise, resilience, and a more proactive stance in the fight against financial crime. With the right tools and strategies, these banks can play a crucial role in combating the estimated $800 billion to $2 trillion laundered globally each year.
