Financial institutions across the US are increasingly merging their fraud prevention and AML programmes, according to a recent report by Hawk and Celent.
The study, titled Trends in AML & Fraud Convergence in US Mid-Market Banks & Credit Unions, explores the biggest drivers prompting banks and credit unions to modernise their anti-financial crime operations.
According to Hawk, one of the most prominent forces behind this transformation is the growing need to contain compliance costs. LexisNexis’ True Cost of Compliance report revealed that 78% of smaller financial institutions have experienced sharp increases in labour-related compliance costs. The convergence of fraud and AML operations, alongside the adoption of advanced technology, is emerging as a key strategy for reducing these burdens. Many firms are now deploying artificial intelligence (AI) and automation to minimise false positives and manual workload, adopting unified platforms that remove silos, and implementing cloud-based or modular solutions that allow for cost-effective scaling.
The acceleration of criminal innovation is also driving this change. Germany’s Financial Intelligence Unit (FIU) reported an 8.2% increase in crypto-related AML cases in 2025, representing 3.3% of all suspicious activity reports. This surge highlights the urgent need for real-time, adaptive tools capable of outpacing fast-evolving criminal tactics. Almost half of the firms surveyed—47%—believe that staying ahead requires modern, responsive fraud and AML technologies.
Customer experience has also become a decisive factor. Outdated fraud systems often create unnecessary friction, frustrating customers and potentially driving them away. While removing verification steps altogether would compromise security, striking the right balance between protection and convenience can give firms a competitive advantage.
The rapid expansion of digital finance further intensifies these pressures. Embedded finance, instant payments, and neobanks are reshaping the financial landscape, with embedded finance projected to triple to $250bn by 2029 and neobanks’ market value expected to hit $2tn by 2030. As 40% of respondents adapt their strategies to meet the demands of this digital revolution, new, agile AML frameworks are becoming essential.
At the same time, rising volumes of financial crime are stretching compliance teams to their limits. Scaling detection capabilities without expanding budgets has become a major challenge, making automation not just an advantage but a necessity.
Regulatory expectations are also evolving rapidly. A third of respondents identified compliance with changing AML and financial crime regulations as a key driver of adaptation. This trend aligns with research by ACAMS, which found that 68% of US financial institutions struggle to interpret and apply new guidance from regulators like FinCEN.
Customer friction extends beyond fraud controls to AML processes themselves. Intrusive onboarding, repeated KYC checks, and transaction freezes can harm client relationships. Integrated, intelligent systems that share data seamlessly are increasingly seen as the solution to minimising these disruptions.
Finally, the role of technology—particularly AI—has become pivotal. A quarter of respondents cited innovation in anti-financial crime technology as a catalyst for change. From traditional and generative AI to the emerging field of agentic AI, these tools are transforming how financial institutions detect and prevent illicit activity. Legacy systems are being replaced by modern, adaptive platforms that enable faster, more effective compliance operations.
As fraud and AML threats evolve, convergence powered by AI and automation is proving to be the only sustainable path forward for financial institutions aiming to manage cost, compliance, and customer trust simultaneously.
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