The global cost of compliance is rising faster than money laundering losses, a trend highlighted in the new Napier AI / AML Index 2025-2026.
While some markets have reported a reduction in illicit finance activity, the financial burden of staying compliant continues to climb. The report shows an average 5% increase in compliance costs worldwide, but the impact is felt most acutely in major financial hubs.
The index found that France, Germany and Singapore each recorded compliance cost growth of around 8–9%, while the UK saw a 15% rise. Even jurisdictions with declining estimated laundering activity, such as Saudi Arabia, are facing significant increases. This widening gap raises an urgent question: why is compliance becoming more expensive than crime prevention itself?
Napier AI, an AI-powered AML platform, recently delved into the challenges in sanctions and screening.
One of the strongest contributing factors is sanctions inflation and the accelerating pace of updates, it said. The number of sanctioned entities continues to expand, but the velocity of change is arguably the bigger challenge. Sanctions lists can update multiple times a day, far outpacing the consultation periods typically offered around AML transaction monitoring changes.
At the same time, the digitisation of corporate filings has increased the speed at which ownership structures can shift. Companies House, for example, processed 14.3m filings in the financial year ending March 2024, with 13.1m submitted digitally — a volume that creates more pathways for bad actors to obscure beneficial ownership.
Screening for politically exposed persons (PEPs) and relatively close associates (RCAs) adds another layer of difficulty, Napier continued. These individuals may not appear on sanctions lists but still represent significant risk depending on a firm’s risk appetite. Institutions often rely on augmented lists or internal whitelists, but these strategies can introduce unintended consequences. A UK-centric screening configuration applied globally can lead to disputes or litigation when it incorrectly blocks transactions in jurisdictions where certain individuals or entities are not sanctioned, it said.
The complexity intensifies in high-risk jurisdictions, particularly those emerging from conflict. When sanctions begin to lift as part of peace or reconstruction efforts, financial institutions must navigate the delicate balance of enabling legitimate activities while preventing former regime affiliates from accessing frozen assets. This becomes especially difficult in regions where data is scarce.
Regulatory divergence further complicates global compliance operations. Firms dealing with cross-border payments or international client bases are exposed to multiple supervisory frameworks. While some markets, such as the United States, are attempting to streamline regulation, others—particularly in the European Union—are enforcing stricter penalties for AML breaches.
Artificial intelligence is increasingly being recognised as a powerful tool to address these screening challenges. Secondary scoring powered by AI can streamline name-matching by automatically discounting false positives. AI also has strong applications in regulatory research, helping teams quickly summarise differences between regimes and identify nuanced prohibitions—but human validation remains essential.
For more insights, read the full story here.
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