Impact of KYC and AI on Financial Crime in 2026

KYC and AI are vital in combating financial crime

• Fraud is becoming more sophisticated, and AI is increasingly being used by fraudsters as well as defenders.
• Financial institutions are being pushed to both keep up with evolving threats and anticipate what comes next.
• Strong KYC at the start of the customer relationship is positioned as a foundation for effective prevention.
• Regulation and compliance remain central, but they must be paired with modern technology and operational execution.
• Collaboration—across industry peers, regulators, and consulting firms—helps unlock wider data pools and better detection.

The Evolving Landscape of Financial Crime

Financial crime in 2026 is defined less by a single dominant scheme and more by a fast-shifting mix of tactics that evolve alongside digital finance. The baseline reality, as framed in Finextra’s report topic, is that fraud is becoming “increasingly more sophisticated,” forcing financial institutions to treat the threat landscape as dynamic rather than cyclical. That shift matters: when fraud changes quickly, controls built for yesterday’s patterns can become brittle, and response times become as important as the controls themselves.

A key marker of this evolution is the growing role of AI “in the hands of fraudsters,” described as an increasingly sophisticated foe for financial institutions. The implication is not simply that criminals have better tools, but that the pace of iteration has accelerated. In practical terms, that means institutions face adversaries who can test, refine, and scale attacks faster than traditional manual processes can adapt.

The dossier also points to the breadth of exposure across the market. Recent data cited in the Finextra framing found that “as many as four out of five companies have experienced payment fraud attacks in 2024.” Even without breaking down geographies or sectors, that single statistic signals how mainstream payment fraud has become: it is not a niche risk confined to a handful of high-profile targets, but a widespread operational hazard.

Against that backdrop, the outlook for 2026 and beyond is framed as a dual mandate: keep up with evolving threats and anticipate and mitigate them effectively. “Keeping up” suggests continuous improvement—updating models, processes, and controls. “Anticipating” suggests something harder: building the capability to detect emerging patterns early, before losses scale.

This is why the conversation increasingly links fraud prevention to broader financial crime programs, including KYC and regulatory compliance. The landscape is no longer just about stopping a single fraudulent transaction; it is about understanding who is transacting, how risk changes over time, and how institutions coordinate their defenses when attackers reuse tactics across multiple firms.

The Role of KYC in Fraud Prevention

Know Your Customer (KYC) is presented in the dossier as crucial precisely because it anchors the customer relationship in verified information from the start. The Finextra framing is explicit: KYC becomes crucial “in order to ensure the right information is available from the start of the customer relationship.” That positioning matters because it treats KYC not as a box-ticking exercise, but as an enabling layer for downstream controls—fraud monitoring, anomaly detection, and investigative workflows all depend on the quality of the underlying customer data.

In a world where fraudsters are becoming more sophisticated, weak onboarding is not just a compliance risk; it becomes a structural vulnerability. If the institution begins the relationship with incomplete, inconsistent, or poorly validated customer information, every subsequent decision—risk scoring, transaction monitoring thresholds, alert triage—starts from a compromised baseline. Conversely, strong KYC creates a clearer picture of the customer and supports more confident decisions later, including when to challenge a transaction, when to request additional verification, or when to escalate.

The dossier’s emphasis on “the right information” also hints at a practical reality: KYC is only as useful as the data it captures and maintains. While the dossier does not enumerate specific data fields or methods, the underlying logic is straightforward—fraud prevention systems need reliable identity and customer context to distinguish legitimate behavior from suspicious behavior. When that context is missing, institutions often compensate by applying broader, more conservative controls, which can increase friction for legitimate customers.

KYC’s role in fraud prevention also intersects with the report’s broader theme: financial institutions must “keep up with the developments in financial crime” by embracing AI, keeping up with regulatory frameworks, and collaborating to leverage wider data pools. KYC is the front door to that ecosystem. If the front door is weak, even advanced AI models and collaborative intelligence can struggle to produce accurate outcomes because the inputs are flawed.

Finally, KYC is positioned as foundational rather than final. The dossier frames it as the start of the relationship, implying that KYC is an initial condition for effective prevention—not the entire solution. In 2026, the operational challenge is to make KYC robust enough to deter and detect bad actors, while integrating it into a broader, technology-enabled approach that can respond to sophisticated, AI-assisted fraud attempts.

Impact of AI on Financial Fraud

AI sits at the center of the 2026 financial crime conversation because it is simultaneously a defensive tool and an offensive weapon. The dossier’s most direct claim is that “AI in the hands of fraudsters is becoming an increasingly sophisticated foe for financial institutions.” That single line captures the core tension: institutions are no longer competing only against human ingenuity and manual coordination, but against adversaries who can use automation and intelligence to scale deception.

The impact is visible in the context of payment fraud. The Finextra framing cites data indicating that “as many as four out of five companies have experienced payment fraud attacks in 2024.” While the dossier does not attribute the cause solely to AI, it places AI-enabled fraud in the same breath as the rising sophistication of attacks. The implication is that AI is part of the acceleration—helping criminals iterate faster, target more effectively, and potentially adapt their methods to the defenses they encounter.

For financial institutions, AI is also presented as part of the solution. The dossier states that to keep up with developments in financial crime, institutions “need to embrace AI.” This is not framed as optional modernization; it is framed as a requirement to remain effective. In practice, the reason is intuitive: when attackers use advanced tools, defenders need comparable capabilities to detect patterns, triage signals, and respond at speed.

But the dossier also sets a higher bar than simple adoption. It says institutions must not only keep up with evolving threats but also “anticipate and mitigate them effectively.” That anticipatory posture is where AI is often positioned: as a way to identify emerging patterns earlier than traditional rules-based systems might, and to support proactive risk management rather than reactive loss recovery.

Still, the presence of AI on both sides creates a strategic arms race. If fraudsters use AI to become more convincing or more adaptive, institutions must ensure their AI is not merely deployed, but governed and integrated into operations. The dossier does not provide implementation details, but it does connect AI to other pillars—regulation, KYC, and collaboration—suggesting that AI alone is insufficient without strong data foundations and coordinated intelligence.

In 2026, the impact of AI on financial fraud is therefore best understood as a shift in tempo and scale. Fraud becomes faster-moving and more iterative, while defense must become more data-driven and collaborative. The institutions that treat AI as a core capability—aligned with KYC quality and regulatory expectations—are positioned to respond more effectively than those relying on legacy approaches.

Regulatory Frameworks and Compliance Challenges

Regulation is presented in the dossier as one of the three pillars shaping the financial crime landscape in 2026, alongside KYC and AI. The framing is clear: to keep up with developments in financial crime, financial institutions need to “keep up with regulatory frameworks.” That phrasing highlights a persistent challenge for compliance teams: regulation is not static, and “keeping up” implies continuous interpretation, implementation, and adjustment.

The compliance challenge is compounded by the evolving threat environment. As fraud becomes more sophisticated—particularly with AI in the hands of fraudsters—regulatory expectations around controls, monitoring, and customer due diligence can become harder to meet using traditional processes. The dossier does not list specific laws or jurisdictions, but it does emphasize that regulation is a shaping force, meaning institutions must align their operational defenses with external expectations, not just internal risk appetite.

A second challenge is that regulation does not operate in isolation from technology choices. The dossier’s prescription is not “comply and stop,” but rather: embrace AI, keep up with regulatory frameworks, and collaborate with industry counterparts, regulators, and consulting firms to leverage wider data pools. That suggests compliance in 2026 is increasingly intertwined with how institutions manage data, deploy analytics, and coordinate with external stakeholders.

KYC is explicitly linked to this regulatory posture. By stating that KYC becomes crucial to ensure the right information is available from the start of the customer relationship, the dossier implies that compliance and fraud prevention share a dependency on data quality and process discipline. If KYC is weak, compliance risk rises; if KYC is strong, it supports both regulatory obligations and fraud mitigation.

There is also an implied operational tension: institutions must move quickly enough to respond to evolving fraud, but carefully enough to remain compliant. “Keeping up” with regulation while “anticipating” fraud requires governance structures that can approve changes, validate controls, and document decisions without slowing the institution to a crawl. The dossier does not quantify this trade-off, but it frames the need for a balanced approach—one that uses AI and collaboration to scale capability while staying aligned with regulatory frameworks.

Ultimately, the compliance challenge in 2026 is not merely about meeting requirements; it is about building adaptable systems and processes that can evolve as both fraud tactics and regulatory expectations change.

Collaboration for Enhanced Security

The dossier makes collaboration a central requirement for modern financial crime defense. It states that financial institutions must make “collaborative efforts with industry counterparts, regulators, and consulting firms in order to leverage wider data pools.” This is a direct acknowledgment that no single institution sees the full picture of fraud patterns—especially when attackers reuse tactics across multiple targets.

Collaboration is positioned as a way to expand visibility. Wider data pools can help institutions detect patterns that might look benign in isolation but become suspicious when viewed across a broader network. The dossier does not specify the mechanisms—whether through formal information-sharing arrangements, joint initiatives, or vendor-facilitated intelligence—but it does specify the stakeholders: peers, regulators, and consulting firms. That mix is notable because it spans competitors, oversight bodies, and external experts, suggesting that effective collaboration requires both trust and structure.

The inclusion of regulators in the collaboration list is particularly important. It implies that collaboration is not only an industry-to-industry activity, but also a way to align defensive practices with regulatory expectations. When institutions and regulators share perspectives—within appropriate boundaries—it can reduce uncertainty about what “good” looks like in a rapidly changing threat environment.

Consulting firms are also mentioned as collaborators, which suggests a role in bridging gaps: translating emerging threats into operational controls, helping institutions implement AI responsibly, or facilitating cross-industry coordination. Again, the dossier does not detail these roles, but the presence of consulting firms in the collaboration triad indicates that expertise and implementation capacity are part of the equation.

Collaboration also complements KYC and AI. Strong KYC ensures the institution has reliable customer information; AI helps process signals at speed; collaboration expands the signal set by bringing in broader intelligence. The dossier’s overall message is that these elements reinforce each other. Without collaboration, institutions may be forced to rely only on their internal data, limiting detection. Without AI, they may struggle to process wider data pools effectively. Without KYC, the data foundation may be too weak to support accurate decisions.

In 2026, collaboration is framed less as a “nice to have” and more as a strategic necessity—an acknowledgment that sophisticated, AI-enabled fraud is a shared problem that demands shared defenses.

Anticipating Future Threats from Fraudsters

The dossier draws a clear line between reacting to fraud and anticipating it. Financial institutions, it says, must not only keep up with evolving threats but also “anticipate and mitigate them effectively.” That distinction is crucial in 2026 because the threat environment is described as increasingly sophisticated, with AI in the hands of fraudsters raising the level of difficulty.

Anticipation implies a forward-looking posture: building capabilities that can identify new attack patterns early, before they become widespread. While the dossier does not provide a taxonomy of future threats, it does provide the underlying driver—fraudsters’ increasing sophistication and the use of AI. From that, the operational implication is that institutions must assume fraud tactics will continue to change and that static controls will degrade over time.

Mitigation, in this framing, is not limited to stopping individual incidents. It suggests building resilience: processes and systems that can adapt quickly, supported by AI, regulatory alignment, and collaboration. The dossier’s recommended approach—embrace AI, keep up with regulatory frameworks, and collaborate to leverage wider data pools—reads like a blueprint for anticipation. AI can help detect weak signals; regulation provides guardrails and expectations; collaboration expands intelligence beyond a single institution’s view.

KYC also plays a role in anticipation. If the institution ensures the right information is available from the start of the customer relationship, it is better positioned to spot anomalies later. Anticipation depends on baselines—knowing what “normal” looks like for a customer or segment. Poor KYC undermines that baseline; strong KYC strengthens it.

The statistic that four out of five companies experienced payment fraud attacks in 2024 adds urgency. When fraud is that widespread, the question is not whether an institution will be targeted, but how prepared it is when new variants emerge. Anticipation becomes a competitive and operational necessity: the ability to reduce losses, protect customers, and maintain trust.

In short, anticipating future threats in 2026 is framed as a continuous discipline rather than a one-time project—one that requires institutions to combine technology, compliance readiness, and shared intelligence to stay ahead of adversaries who are also innovating.

Key Insights from the Finextra Webinar

The dossier describes a Finextra report that “highlights the key takeaways of a Finextra webinar,” hosted in association with NiCE Actimize, featuring a panel of industry experts. While the dossier does not list individual speakers or verbatim quotes from the session, it does provide the core themes the webinar addressed and the conclusions the report emphasizes.

First, the webinar’s context is a fraud environment that is becoming more sophisticated, with AI increasingly used by fraudsters. This is not presented as a speculative risk but as an active challenge for financial institutions. The cited data point—“as many as four out of five companies have experienced payment fraud attacks in 2024”—functions as a grounding statistic for why the topic matters now, not later.

Second, the webinar’s implied message is that institutions cannot defend effectively with legacy approaches alone. The dossier states that to keep up with developments in financial crime, financial institutions need to embrace AI. This is a key insight because it frames AI as a necessary capability for defense, not merely an efficiency upgrade. In a world where attackers use AI, defenders must also modernize.

Third, the webinar ties technology to governance. It emphasizes keeping up with regulatory frameworks, indicating that innovation must be aligned with compliance expectations. The report’s framing suggests that the future of financial crime prevention is not a choice between speed and compliance; it is about building systems that can deliver both.

Fourth, collaboration emerges as a central takeaway. The dossier explicitly calls for collaborative efforts with industry counterparts, regulators, and consulting firms to leverage wider data pools. This is a practical insight: sophisticated fraud often spans multiple institutions, and broader intelligence can improve detection and response.

Finally, KYC is positioned as foundational. The dossier states KYC becomes crucial to ensure the right information is available from the start of the customer relationship. This is a key operational insight because it links onboarding quality to downstream fraud prevention effectiveness. If the institution starts with weak data, even advanced AI and collaborative intelligence may underperform.

Taken together, the webinar’s key insights—AI adoption, regulatory alignment, collaboration, and strong KYC—form a coherent narrative: financial crime defense in 2026 is an ecosystem problem that requires coordinated capabilities, not isolated fixes.

The Importance of Data Sharing in Financial Services

Data sharing is not framed in the dossier as an abstract ideal; it is presented as a practical requirement for leveraging “wider data pools” through collaboration. The rationale is straightforward: as fraud becomes more sophisticated and AI-enabled, the signals that indicate an attack may be distributed across institutions, channels, and time. A single firm’s internal dataset can be too narrow to reveal the full pattern.

The dossier’s prescription is explicit: financial institutions should collaborate with industry counterparts, regulators, and consulting firms to leverage wider data pools. That statement effectively defines data sharing as a means to an end—enhanced detection and mitigation—rather than a standalone initiative. In 2026, the value of data sharing is tied to speed and context: the ability to recognize emerging fraud tactics early and respond before they spread.

Data sharing also connects directly to AI. If institutions are encouraged to embrace AI, and also to leverage wider data pools, the implied model is that AI systems can process larger, more diverse datasets to identify patterns that would be difficult to detect manually. Wider data pools can improve the breadth of signals available for analysis, while AI can help turn those signals into actionable insights.

KYC again sits at the foundation. The dossier emphasizes ensuring the right information is available from the start of the customer relationship. Data sharing initiatives—formal or informal—are only as useful as the quality and consistency of the underlying data. If customer information is incomplete or unreliable, shared intelligence can become noisy or less actionable. Strong KYC supports cleaner, more reliable data inputs.

The inclusion of regulators in the collaboration list also implies that data sharing must be approached carefully and within appropriate frameworks. While the dossier does not detail privacy, governance, or legal constraints, the mention of regulators suggests that institutions must balance the benefits of wider data pools with the obligations of compliance and responsible data handling.

In 2026, the importance of data sharing in financial services is therefore framed as a strategic multiplier. It expands visibility beyond the boundaries of a single institution, supports AI-driven detection, and strengthens collective resilience against sophisticated fraud—provided it is built on solid KYC foundations and aligned with regulatory expectations.

Final Thoughts on the Future of Financial Crime Prevention

The Role of Technology in Combating Financial Crime

The dossier’s throughline is that technology—particularly AI—has become inseparable from financial crime outcomes in 2026. Fraudsters are using AI in increasingly sophisticated ways, and financial institutions are urged to embrace AI to keep up with developments in financial crime. But the message is not “deploy AI and you’re done.” The report framing repeatedly ties technology to other essentials: strong KYC at onboarding, regulatory alignment, and collaboration that unlocks wider data pools.

The practical takeaway is that technology is a capability layer. It can help institutions keep pace with fast-evolving threats and support the shift from reactive defense to anticipation and mitigation. Yet its effectiveness depends on inputs (KYC data quality), constraints (regulatory frameworks), and context (shared intelligence from collaboration).

Building a Collaborative Ecosystem for Enhanced Security

The dossier points to a future where institutions defend not as isolated entities but as participants in a broader ecosystem—working with industry counterparts, regulators, and consulting firms. That ecosystem approach is presented as a way to leverage wider data pools and improve resilience against sophisticated, AI-enabled fraud.

In 2026, the institutions best positioned to reduce fraud risk are those that treat KYC as a foundation, AI as a necessity, regulation as a constant, and collaboration as a force multiplier. The direction of travel is clear in the dossier: financial crime prevention is becoming more networked, more data-driven, and more dependent on coordinated action than ever before.