Payments are undergoing a rapid transformation as instant settlement becomes the new standard. Both domestic and cross-border instant payment schemes are reshaping expectations for speed and convenience.
Napier AI, a developer of financial crime compliance solutions, has delved into why instant payments need better AML.
Recent data shows that 86% of businesses and 74% of consumers have used faster or instant payments in the past month. While these developments enhance liquidity and efficiency, they also drastically reduce the time available for financial institutions to detect and prevent financial crime.
In anti-money laundering (AML), delays can be costly. If compliance teams take too long to identify anomalies, bad actors gain a significant advantage, Napier AI explained.
Pre-validation: compliance before the transaction
When money moves instantly, there’s no opportunity to intercept suspicious activity mid-transfer. The most effective safeguard is pre-validation — screening and assessing risk before a transaction is even initiated. This proactive approach ensures that institutions already know who is sending funds, who is receiving them, and what accounts or wallets are involved.
Pre-validation shifts compliance from a reactive model to a preventative one. Unlike transaction monitoring, which analyses payments after they occur, pre-validation screening assesses risk before posting or clearing a transaction, making it indispensable for instant payment environments.
Keeping pace with faster rails
As payment systems become frictionless for customers, compliance operations risk becoming bottlenecks if they cannot match that speed. Without real-time detection, instant rails can create blind spots where illicit activity slips through.
Effective AML systems must therefore detect risks in real time, maintain low false positive rates, and provide explainable, auditable decisions that give regulators confidence. Financial institutions adopting a multi-configuration approach to screening are better equipped to achieve this balance.
Multi-configuration screening for risk-based control
A one-size-fits-all approach no longer meets the needs of modern payments, it noted. Multi-configuration screening enables institutions to apply tailored strategies for different risk levels.
For example, sanctions checks may be conducted with the highest stringency in real time, while politically exposed person (PEP) screenings use internal watchlists and risk-based thresholds. Similarly, large cross-border transfers may trigger enhanced due diligence, while smaller domestic payments are processed with lighter checks. This layered approach maintains efficiency while directing resources toward higher-risk activities, Napier AI stated.
AI-driven transaction screening
Artificial intelligence plays a growing role in improving both pre- and post-alert detection. AI can learn typical customer behaviours and identify deviations in seconds, allowing institutions to detect anomalies such as wire stripping — when criminals alter payment details to hide sanctioned entities.
Post-alert, AI assists analysts by recommending whether to escalate or dismiss alerts based on match quality and key attributes like nationality, date of birth, or ID data. This automation reduces manual workloads and enhances decision accuracy.
As instant payments become the global norm, payment institutions that balance speed, compliance, and customer experience through smarter AML technologies will be the ones to gain a lasting competitive advantage.
For more insights, read the full story here.
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