As financial crime continues to evolve in scale and sophistication, Australian banks are facing unprecedented pressure to transform their compliance and risk operations. Fraud, money laundering, and sanctions evasion are being amplified by digitalization and the misuse of advanced technologies—including AI—by criminal networks. Globally, illicit financial flows are estimated to exceed $3.1 trillion, with fraud-related losses projected at over $485 billion.
To address these challenges and support the industry’s transformation journey, Cognizant hosted a closed-door roundtable in Sydney, bringing together senior leaders from Australia’s banking sector. The session focused on operational resilience, talent strategy, and the role of AI in transforming AML/CTF and fraud operations—drawing on global best practices and Cognizant’s experience supporting financial institutions across markets.
Rising regulatory pressure and talent constraints
AUSTRAC has seen a near-doubling of Suspicious Matter Reports (SMRs) between 2020 and 2024, reflecting both the growing complexity of financial crime and the mounting burden on regulated entities. Tranche 2 reforms, effective April 2026, will expand AUSTRAC’s reporting base from 15,000 to over 120,000 entities—bringing Australia into alignment with FATF standards. Adjacent reforms, including the Scams Safe Accord and CPS230, further intensify operational demands.
One big four bank shared that its AML team grew from 200 to over 700 staff following a major compliance remediation program. However, this expansion came at the cost of its fraud team, creating “a significant vacuum on the fraud and scams side” during a period of heightened threat. “Throwing people at the problem,” the representative noted, “did not solve the underlying issue on why we’re seeing the problems.”
Offshoring has become a common strategy, but competition for skilled analysts remains fierce—even offshore. Smaller institutions often share outsourcing partners with larger banks, raising concerns about prioritization and talent retention. “When we need a transaction monitoring capability, we might only be able to attract a KYC capability,” one participant observed.
Mutuals and Tier 2 banks are disproportionately impacted by scammer and mule ‘disbursement’ as larger institutions tighten controls. This displacement has led to a surge in SMRs, account freezes, and strain on legacy systems.
AUSTRAC has sharpened its focus on offshore governance and cultural alignment. “Speaking to quite a few AUSTRAC investigators who go through SMRs, they say it’s pretty obvious the person who has put this together understands the Australian aspect of it,” a Cognizant representative shared.
Generative AI offers promise in bridging cultural gaps and replicating local market knowledge. “We need to ask, ‘How can we use AI or LLMs to replicate that knowledge of the Australian market in a dynamic way?’” one participant said.
Breaking silos and re-platforming for scale
Data fragmentation continues to hinder AML/CTF effectiveness. Participants highlighted the inability to share data across platforms, limiting visibility into interconnected fraud and ML/TF events. “Nearly every single fraud transaction has a money laundering risk associated with it,” one noted.
Legacy institutions often operate siloed systems for fraud alerts, GDPR, KYC, and SMR submissions. “Breaking these silos is a challenge that we’re only now looking at,” a participant admitted.
One non-major bank successfully centralized its AML/CTF and fraud operations, outsourcing and re-platforming with a single vendor in just nine months. “Our tech supplier is on the hook for outcomes from a people perspective, so they know they need to make changes to the technology to achieve performance outcomes.”
The platform automates SMR generation and submission to AUSTRAC, routing alerts to the most capable investigator. Participants emphasized the need to integrate regulatory changes holistically. “We’d have had several different regulation program changes running in parallel. The transformation we need is to serve up that information into one central repository.”
Proactive, not reactive, transformation
Embedding breakthrough technologies like AI into AML/CTF systems requires bold leadership and strategic planning. “It’s a brave decision to halt BAU and develop everything in parallel,” one participant said.
Rather than reacting to regulatory change to avoid fines, institutions must prioritize genuine risk management. “We go and do these spot changes, but they’re not the genuine risk we’re facing,” a participant noted.
Transparency with regulators is key. “Having a collaborative regulator on side is in everyone’s interests,” participants agreed.
Excited but cautious: Approaching Next-gen Tech
While AI adoption is growing—particularly in fraud detection—financial crime teams remain cautious. One big four bank noted strong uptake of AI in customer experience and fraud controls, but limited use in AML/CTF due to risk appetite and data limitations.
“There’s zero appetite for error,” one participant said. “A human in the loop offers far more confidence than an unthinking machine.”
Still, institutions are experimenting. One is “dabbling” with AI in Transaction Escalation Monitoring (TEM), while another uses AI as the “first examiner” of ML/TF incidents. “Machine capacity is huge compared to humans—a machine can recall the 2,000 companies that are known scammers.”
Cognizant’s recommendations: Building resilience through strategic uplift
As the host of this roundtable and a strategic partner to leading financial institutions globally, Cognizant offers a proven framework to help banks navigate regulatory change, operational complexity, and technology transformation. Our recommendations include:
- AI-powered fraud monitoring: Cognizant’s Agentic AI solutions enable real-time fraud detection, automatic customer notifications, and AI-assisted case triage—supporting 24/7 monitoring with scalable precision.
- KYC remediation at scale: Our AI-enabled surge management tools automate risk assessment and document generation, helping institutions manage large-scale KYC projects without draining internal resources.
- Hybrid and core-flex resourcing models: We help clients design scalable workforce strategies that balance cost, availability, and compliance. Our managed services and captive centers ensure consistent quality and regulatory defensibility.
- Platform optimization & automation: Cognizant supports re-platforming initiatives that unify fraud and AML capabilities. Our automation accelerators streamline KYC, name screening, case triage, and SAR workflows—reducing manual effort and improving throughput.
- Regulatory readiness & governance: We provide Tranche 2 playbooks, CPS230-aligned governance templates, and AML maturity benchmarking tools. Our frameworks help institutions build board-level visibility and escalation protocols.
- Data integration & Intelligence fabric: Our data fabric solutions break down silos, enabling real-time risk scoring, cross-channel anomaly detection, and contextual alert enrichment.
- BPaaS for community banks: For mutuals and Tier 2 institutions, we offer KYC, AML, fraud, and sanctions as managed services—eliminating heavy tech investments and improving defensibility.
- Global best practices: Cognizant brings insights from financial institutions worldwide that have reduced operating costs by up to 40% while improving compliance posture and responsiveness.
As the industry prepares for Tranche 2 and beyond, Cognizant remains committed to helping institutions build resilience, improve intelligence contribution, and strengthen trust with regulators and customers alike.
