Heather thought she was being cautious. When a helpful bank employee called to warn her of suspicious account activity, she listened carefully. As the caller shared details about her local branch and responded to her concerns with authority, Heather became reassured. What she didn’t realise was that this helpful bank employee was in fact a fraudster – someone trained in manipulation and using social engineering tactics to gather her personal data and even record her voice. Before long, they had everything they needed to impersonate her and initiate unauthorised transactions.
Heather’s story is one of countless examples of fraudsters accessing personal information and a sobering reminder of how exposed both individuals and institutions are to deception and financial harm. In today’s hyper-connected digital world, cybercriminals are using advanced tools to exploit gaps in security and regulation.
There are many other types of scams targeting individuals and businesses alike. Fraud can scale dramatically, such as AI-generated deepfakes impersonating your boss on a video call to trick you into authorising multimillion-dollar company transactions.
“The ready availability of new generative AI tools can make deepfake videos, fictitious voices, and fictitious documents easily and cheaply available to bad actors,” writes Deloitte in its FSI Predictions 2024 report. “For audio deepfakes alone, the technology industry is behind in developing tools to identify fake content.”
However, the financial services industry isn’t standing still. It too is turning to AI-powered technologies to enhance compliance and risk management, and empower their teams to detect and prevent fraud before it can cause harm.
“AI enhances fraud detection by analysing vast amounts of transaction data to spot suspicious patterns, reducing financial crime risks,” says Chris Knox, director of worldwide financial services at Microsoft. “Automation powered by AI streamlines compliance processes, ensuring continuous monitoring of regulatory requirements and minimising human error. In an era where cyberthreats are increasingly sophisticated, AI-driven security solutions, such as behavioural analytics and automated incident response, provide financial institutions with the agility and intelligence needed to safeguard their systems. Leveraging AI is not just an advantage – it is essential for regulatory compliance and resilience.”
“AI technologies, including machine learning, predictive analytics and now generative AI enables banks to analyse vast amounts of data, identifying patterns and anomalies that may indicate fraudulent activities or money laundering schemes,” says Tyler Pichach, head of banking and payments strategy at Microsoft. “For instance, AI can detect unusual transaction patterns, flagging them for further investigation, which helps in early detection and prevention of financial crimes. Moreover, AI-driven systems can continuously learn and adapt to new fraud tactics, making them more effective over time. This dynamic capability allows banks to stay ahead of increasingly sophisticated fraudsters.”
Chris Knox (left) and Tyler Pichach
Deloitte’s FSI Predictions 2024 report references J.P. Morgan for example, as having incorporated large language models for email compromises and Mastercard’s Decision Intelligence tool to predict if a transaction is genuine.
“While AI can manage large volumes of data and identify potential threats with high accuracy, human expertise is essential for interpreting complex cases and making nuanced decisions,” says Pichach. “Banks can achieve this balance by implementing a hybrid approach where predictive AI systems handle routine and high-volume tasks, such as initial screening and flagging of suspicious activities. These transactions can then run through generative AI reasoning models like Microsoft Azure OpenAI o3 and o4-mini to refine those that are more likely to be fraud, which can then be passed to human analysts who can focus on complex investigations.”
To ensure effective collaboration between AI and human oversight, banks should establish clear rules for when and how human intervention is required.
“Protocols should include setting thresholds for AI-generated alerts that necessitate human review and creating feedback loops where human analysts can provide input to improve AI models,” says Pichach. “Additionally, ongoing training and development for human analysts are essential to keep them updated on the latest AI tools and techniques, enabling them to work effectively alongside technology.”
As financial criminals develop new tactics, AI is also helping organisations to adapt to emerging threats in real time.
“AI-powered compliance solutions help financial institutions stay ahead of evolving financial crimes by enabling real-time threat detection, adaptive risk management and automated response mechanisms,” says Knox. “Machine learning models analyse vast amounts of transaction data to identify suspicious patterns and anomalies that may indicate fraud, money laundering or other illicit activities. Unlike rule-based systems, AI continuously learns from new threats, improving its accuracy over time.
“Natural language processing (NLP) enhances screening processes by analysing unstructured data from various sources, such as news reports and regulatory updates, to identify emerging risks. Additionally, AI-driven automation reduces false positives, enabling compliance teams to focus on genuine threats more efficiently. By leveraging AI, financial institutions can strengthen their compliance frameworks, enhance resilience against financial crime and adapt swiftly to an ever-changing threat landscape.”
To take advantage of AI, banks first need to ensure their data is in order.
“Our customers are leveraging AI to unify data for advanced risk calculations, increasing customer acquisition, reducing false positives and ensuring regulatory control management,” says Pichach.
Portuguese bank Novobanco used Microsoft Fabric and Quantexa’s entity resolution capabilities to unify its siloed data estate.
“Novobanco’s obsession with being customer-first is amazing and the idea of using Microsoft Fabric plus the entity resolution capabilities of Quantexa allows Novobanco to have a single platform to build new products and capabilities, create efficiencies and do that at once,” says Bill Borden, corporate vice president of worldwide financial services at Microsoft.
Novobanco in Portugal is working with Microsoft and Quantexa to unify its data, which in turn helps its employees to better serve customers
The collaboration between Microsoft and Quantexa brings together powerful data integration and advanced analytics, enabling Novobanco to unlock new insights across its banking operations.
“Microsoft Fabric provides this amazing gathering place for data,” says Dan Higgins, chief product officer at Quantexa. “When you then bring Quantexa’s scalability and accuracy of joining that data, you can drive customer growth, identify behaviours that might be indicative of financial crimes and then drive greater efficiency into the back office. It reduces the cost of inefficient infrastructure, redundant data storage and processing, and unlocks time and capital for further innovation.”
The Union Bank of Switzerland (UBS), which also struggled to harness information from its vast internal data, has enhanced compliance and efficiency by building a platform on Azure.
“The collaboration between UBS and Microsoft was driven by our need for flexibility and a robust technological roadmap,” says Lukasz Opoka, head of analytics and sales platform of wealth management and personal and corporate banking at UBS. “Azure allowed us to customise our platform and significantly enhance our service offerings.”
UBS built two domain-specific AI assistants, collectively known as UBS Red. They were developed using Azure AI Search and Azure OpenAI Service to provide support to client advisors during customer interactions.
“The internal information that we have, the financial expertise, the insights into financial markets, what’s happening in the world, it’s vast,” says Michel Neuhaus, head of AI, data and analytics of personal and corporate banking at UBS. “We have to find ways to make this content easily accessible to each and everyone in the bank, and Microsoft helps us with that.”
UBS has digitised approximately 60,000 investment advice and product documents as a knowledge base. With these advancements, UBS is able to deliver AI-driven insights to risk professionals while addressing the complex regulatory landscape of the financial industry.
UBS has customised its own platform on Azure to support client advisors during customer interactions
“Microsoft is helping financial services firms operationalise AI-driven compliance and risk management through secure, scalable solutions like Azure AI,” says Knox. “Through partnerships with industry leaders, Microsoft integrates AI into compliance workflows, improving efficiency and accuracy. For example, collaborations with firms like PwC and Moody’s leverage AI-powered analytics to enhance regulatory monitoring, operational resilience, and financial crime prevention.”
The regulatory landscape evolves quickly. In 2025 alone, financial services firms need to comply to the European Union’s Digital Operational Resilience Act, the Financial Stability Board’s Format for Incident Reporting Exchange framework, anti-money laundering directives, the EU AI Act, the implementation of Basel 3.1 in the UK, the continuing impact of Markets in Crypto Assets Regulation, and expected updates to Payment Services Directive 3 and the Payment Services Regulation, to name just a few.
AI is fast becoming a critical tool in helping organisations meet both regulatory expectations and business demands.
“AI plays a critical role in helping financial services firms meet the stringent requirements of regulations by enhancing operational resilience and cybersecurity,” says Knox.
“Advanced AI-driven analytics can scan regulatory updates across jurisdictions, identifying relevant changes and assessing their impact on business operations. This allows firms to adapt quickly and ensure ongoing compliance.
“Compliance tools, powered by AI, also streamline reporting by automating data collection, validation and submission, minimising human error and improving efficiency. Machine learning models can predict regulatory trends by analysing historical data and enforcement actions, allowing firms to anticipate changes and implement controls in advance. Additionally, AI-driven risk assessment tools enhance decision-making by continuously monitoring transactions and operational risks. By integrating AI into compliance strategies, financial institutions can not only meet regulatory demands but also build a more agile, future-proof compliance framework. With continuous innovation in responsible AI, cybersecurity and privacy-enhancing technologies, Microsoft empowers financial services organisations to stay ahead of regulatory shifts, enhance transparency and streamline compliance.”
These regulatory innovations are just one part of the broader AI transformation story across financial services.
“AI can enhance risk management by providing real-time insights into market conditions, liquidity risk, credit risk and operational risk,” adds Pichach. “This allows banks to make informed decisions about their portfolios, optimise their risk exposure and improve overall financial performance. By demonstrating a proactive approach to risk management and customer service, banks can build trust and loyalty among their customers.
“In addition, generative AI – including AI agents – improves operational efficiency by automating routine processes, freeing up human resources to focus on higher-value activities,” says Pichach. “This not only reduces costs but also enhances the customer experience by providing faster and more accurate services. The strategic use of AI can help banks differentiate themselves in a competitive market, fostering long-term customer relationships and driving business growth.”
As fraudsters evolve, so too must the defences. With AI at the core of modern compliance and risk management strategies, financial institutions can not only detect and prevent threats more effectively, but also build trust, resilience and long-term value in an increasingly complex digital world.
Partner Perspectives
We asked selected Microsoft partners how they are using Microsoft technology to support financial services organisations in strengthening risk management and compliance
“3Cloud leverages generative AI and intelligent document processing to accelerate the ingestion and standardisation of state-specific ACORD forms, to land quality data into financial services clients unified data platform within Microsoft Azure. Advanced models then flag over/under coverage scenarios and deliver actionable insights through intuitive agent interfaces,” says John Miroballi, vice president of sales, financial services, at 3Cloud.
“Avalara leverages Microsoft Dynamics 365 and GP integrations to help organisations automate electronic invoicing and tax reporting,” says Alex Baulf, vice president of e-invoicing and live reporting at Avalara. “Through Avalara E-Invoicing and Live Reporting, firms can embed compliance workflows directly in their enterprise resource planning systems, enabling real-time invoice validation, transmission and error handling.”
“By leveraging GPT-4o alongside Azure’s scalable, secure AI infrastructure to power several generative AI solutions, Moody’s combines industry-leading innovation with its expansive data estate to deliver transformative tools across credit assessment, prospecting and growth strategy, reporting, KYC and portfolio monitoring with early warning signals,” says Cristina Pieretti, general manager and head of generative AI solutions at Moody’s.
“Quantexa transforms fragmented data into a single, trusted view that powers AI-enabled decision-making across fraud detection, anti-money laundering compliance, and sanctions screening,” says Dan Higgins, chief product officer at Quantexa. “With increasing regulatory scrutiny on both financial crime and AI deployment, available on Q Assist, institutions require transparent, explainable solutions that ensure compliance while maintaining operational efficiency. This approach enables the organisations we work with to make confident decisions at every level while building resilient defences against evolving threats in today’s increasingly complex financial landscape.”
Discover more from these partners and others, including Coretek, GEP and Synergy Technical, in the Summer 2025 issue of Technology Record. Don’t miss out – subscribe for free today and get future issues delivered straight to your inbox.