AI at the Crossroads of Compliance and Crime

Abstract

As financial systems grow increasingly digitized, money laundering methods have become more complex and harder to detect. This chapter explores the dual role of AI in the digital economy,both as a tool for combating illicit financial activity and as a potential risk. With the rise of cryptocurrencies, decentralized finance, and automated financial platforms, traditional compliance mechanisms are struggling to keep pace. AI technologies offer powerful tools for improving transaction monitoring, identifying suspicious behavior, and enhancing real-time risk analysis. However, these technologies also raise concerns about bias, opacity, and regulatory accountability. Drawing on theoretical frameworks such as Routine Activity Theory and Strain Theory, the chapter examines structural vulnerabilities in digital finance. It also analyzes the current regulatory gaps that hinder effective enforcement. The study concludes with recommendations for ethically integrating AI into AML systems, strengthening global coordination, and updating compliance models for the digital era