Smart Defenses for Smart Banks
Technology—AI in particular—has fueled a high-stakes game of cat and mouse between bad actors and the financial sector. Today, AI gives banks not only an upper hand but also makes them more efficient on the plus side.
Technology has given criminals of all sizes more power than ever to harm banks and their customers.
Thanks to AI, their arsenals are brimming with high-tech weaponry, including synthetic identities, deepfake documents and automated mule networks that can move illicit funds across the planet at a dizzying pace.
And what once required dozens of people and months of planning can now be executed by algorithms in days.
Fortunately, banks can also use AI to defend against those threats.
When used correctly, AI doesn’t just halt attacks—it supercharges value by making defenses smarter and operations more efficient.
And while the arms race between good and bad has escalated, those who fight financial criminals with smarter firepower can reap the most valuable reward of them all—trust.
A perfect storm builds
A perfect storm is brewing in the financial services industry: sanctions lists are longer and are updated intraday instead of monthly. Cross-border transactions are surging, and regulators are demanding more disclosure and reporting—and they want it all delivered faster.
Together, these forces create operational stress that traditional technology stacks cannot manage, especially with sophisticated criminals teeming below the radar.
“You need to identify threats at machine speed,” Peter Banham, Temenos Product Director and financial crime expert, said during Temenos’s recent webinar, Is Your Tech Fighting Financial Crime—or Fueling It? “It’s essential to defend yourself and your clients against financial crime.”
Criminals are clearly stepping up their game. Deepfake attacks have surged twentyfold in just three years[1], while 80% of banks admit they cannot keep up with AI-powered threats.[2]
Criminals are leveraging technology to optimize speed and efficiency and cut costs, and AI has become their weapon of choice.
In effect, criminals and banks are locked in a race to see who can gain the greater edge in efficiency.
“The efficiency gains that we see in compliance they see efficiency gains in fraud or money laundering or in evasion against our detection,” Banham said. “You have to be more efficient and more effective with the systems and teams you have.”
The stakes are high, as criminals need to succeed only once, Banham stressed. Banks must succeed every time or risk theft, fines, reputational damage, and lost business.
The false positive trap
False positives, legitimate transactions flagged as suspicious, can account for an astonishingly high number of alerts—in some cases, 95%.[3]
Clarifying them leaves compliance teams exhausted, budgets strained and makes it much harder to identify genuine risks.
AI reverses that trend by triaging alerts, learning from past cases, and flagging only those that truly warrant further investigation, thus improving efficiency.
“Just imagine the daily operational workload to handle all those alerts, and now in a far more time-pressured environment,” Banham pointed out. “AI agents can reduce the alert fatigue as well as provide faster resolution times for this triage.”
Other webinar participants underscored the business risks of making the wrong call when it comes to financial crime, errors that can be costlier than ever. The penalties for failure today have never been tougher, and the right AI strategy helps here.
“If your AI is proposing that you block a transaction that you shouldn’t block, or worse—the opposite: that you let go a transaction that you shouldn’t because you’re transacting with a sanctioned terrorist, for example, clearly the business risk is much higher, so that degree of explainability becomes all the more acute,” said Ioannis Perrakis, Head of Innovation for Temenos’s Product Management team and an AI expert.
“We think there is a huge opportunity through Co-Pilot-style and other Gen AI products to really transform how banks design and launch and maintain financial products,” Perrakis added. “AI is really at the heart of core banking itself.”
From following rules to intelligence that rules
AI is not new. It started out with humans teaching rules to machines and has evolved into deep learning engines and generative systems capable of producing text, speech, images, even entire case reports.
Agentic AI is leading the latest wave of innovation in this space. Copilots and agents have moved beyond identifying risks. Today, they’re orchestrating responses, compiling suspicious activity reports, and recommending decisions.
That makes the human role more relevant. The same way robots automated physical monotony on auto assembly lines, AI will continue to do likewise with cognitive monotony—processing data at machine speed—so compliance teams can apply their expertise to the most complex and sensitive of cases.
Translation: people will remain employed in posts that add more value, something that should jibe well with regulators who want humans in the loop for high-stakes actions such as blocking suspect payments.
“We are not talking about agents and chatbots or really any kind of AI replacing humans, but we are talking about AI ideally as a trusted responsible assistant,” Perrakis said. “We are talking about providing recommendations and even decisions that let the agent execute, or the human takes the final step.”
Trust as the endgame
Nothing ensures long-term success in banking more than trust. A bank can employ the latest technology and offer speedy product launches tailor-made to what customers want. But if the bank is vulnerable to crime, those customers will flee.
Customers must know their money is safe, and regulators must know the bank is doing all in its power to keep it that way.
Modernization that prioritizes AI builds that trust. Investors applaud those who take the steps to better protect their customers and improve efficiency and compliance.
“Those components are all key parts of a company’s share price. Compliance is driving into share price. That trust is hard to gain. It’s easy to damage and lose,” Banham said.
“So, working in partnership with technology, institutions can leverage these efficiencies, they can strengthen their compliance.”
That makes compliance an incredibly competitive differentiator in the marketplace.
The way forward
Financial crime will continue to evolve at machine speed. To keep pace, banks need to fight fire with smarter fire.
AI is a shield, an accelerator and a differentiator. It can help banks protect and boost efficiency on the upside. Or it’s a powerful weapon that can exploit weaknesses in your legacy systems.
In this arms race, standing still is not an option.
Winning it is.
