Waiting to implement identity verification is a risk
Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Act 2024 has officially passed, with full enforcement set for March 2026. Financial institutions now have a clear compliance mandate, but waiting to act will invite unnecessary risk.
That’s because criminals won’t wait. Fraudsters looking to exploit weak identity verification (IDV) processes will actively seek out institutions that delay compliance. The longer a business takes to strengthen its fraud prevention measures, the more attractive it becomes as a target.
This is more than a compliance issue. Adverse selection will disproportionately affect organizations that hesitate, as criminals focus their efforts on those with weaker security measures.
What is adverse selection & why does it matter?
In financial crime prevention, adverse selection occurs when criminals deliberately choose to target institutions with weaker fraud prevention controls. When one bank, lender, or fintech implements stronger defenses while others delay, fraudsters shift their focus to the easiest targets.
This isn’t theoretical—it’s a well-documented phenomenon. Criminals follow the path of least resistance, and advancements in AI-driven fraud have made it easier than ever for them to find vulnerabilities. Instead of only relying on stolen personally identifiable information (PII), they can now generate using AI and deepfake technology very high-quality identity documents using the stolen PII data that can bypass outdated verification methods and match government databases.
Regulators are addressing this growing threat with the AML/CTF Amendment Act 2024, which strengthens:
- Customer due diligence (CDD) requirements
- Ongoing monitoring of transactions and identity verification processes
- Use of independent and reliable data sources to verify identities more effectively
These measures establish a stronger compliance foundation, but meeting regulatory requirements alone won’t eliminate risk. Institutions that do the bare minimum may comply with the law, yet still remain vulnerable to fraud. Those that take a proactive, multi-layered approach to identity verification will be in a far stronger position to detect and stop financial crime.
Strengthening compliance & stopping fraud with identity verification
The strongest compliance and fraud prevention strategy starts with advanced identity verification (IDV)—ensuring financial institutions don’t just meet the standard but set the standard.
Fraudsters are increasingly relying on deepfakes, breached PII, and AI-generated documents—attacks that traditional verification methods struggle to detect.
While IDV alone does not fully meet AML/CTF compliance requirements, it provides a critical independent and dynamic data source that enhances an institution’s ability to:
- Verify identities using real-time, independent, and reliable data sources, reducing reliance on outdated, static records.
- Leverage Deepfake Defender™ technologies, an AI-powered solution designed specifically to detect and prevent deepfake liveness and identity document fraud at scale—stopping sophisticated fraud before it impacts your business.
- Strengthen due diligence with biometric authentication and real-time validation, improving KYC accuracy.
- Integrate IDV seamlessly into AML/CTF compliance frameworks, complementing transaction monitoring, risk profiling, and ongoing fraud detection.
Institutions that proactively integrate AI-powered IDV solutions will be far better positioned to both meet compliance standards and avoid the growing threat of fraud-driven adverse selection.
Delay implementation, increase your fraud risk
The enforcement deadline of March 2026 is approaching, but fraudsters aren’t waiting. AI-generated fraud techniques—such as deepfakes liveness and AI-created identity documents—are already in widespread use, targeting financial institutions that haven’t adapted.
Businesses that delay implementation aren’t just preparing for compliance deadlines—they’re making themselves the prime target for fraudsters who have already moved beyond traditional security controls.
Waiting to implement robust IDV solutions increases risk in several ways:
- Higher fraud losses, as criminals use AI-generated IDs and deepfakes to bypass outdated verification controls.
- Regulatory penalties, as enforcement deadlines approach and non-compliant institutions come under scrutiny.
- Reputational damage, as fraud-related breaches erode customer confidence.
- Operational inefficiencies, as rushed compliance implementation in 2025-26 strains internal teams.
Businesses that fail to act now will be playing defense instead of preventing fraud. Those that move early will have stronger security measures in place well before enforcement begins.
A smarter approach to AML/CTF preparedness
The AML/CTF Amendment Act 2024 isn’t just about compliance—it’s an opportunity for financial institutions to strengthen security, reduce fraud losses, and build long-term customer trust. Those who take a proactive approach now will be better positioned to stop fraudsters before they exploit vulnerabilities.
Institutions that act early will:
- Deploy AI-powered IDV solutions that verify customers dynamically using biometric authentication and real-time validation—creating a moving target that fraudsters can’t easily manipulate.
- Adopt a multi-layered fraud defense by combining document fraud analysis, behavioral risk assessments, and continuous transaction monitoring to stay ahead of evolving threats.
- Develop a compliance roadmap now—ensuring AML/CTF integration into existing KYC and risk management processes before the industry-wide rush in 2025-26.
- Monitor regulatory updates and industry best practices to maintain compliance readiness while adapting to emerging fraud tactics.
Waiting until the last minute only invites greater risk. By taking action now, financial institutions can avoid being singled out as easy targets and ensure they remain both secure and fully compliant without disruption.
Act now or become a target
The AML/CTF Amendment Act 2024 is a necessary step forward in the fight against financial crime. However, institutions that treat it as just another compliance box to tick will expose themselves to unnecessary risk.
By adopting advanced digital identity verification solutions, financial institutions can:
- Ensure compliance with AML/CTF mandates efficiently and proactively.
- Detect and prevent deepfake and AI identity fraud before it impacts their business.
- Avoid becoming an easy target for criminals seeking weak verification controls.
The financial industry is at an inflection point. Fraudsters are already making their choices—will they see your financial institution as a secure fortress or an easy target? The business decision is yours.
And as a consumer—Is your financial institution adopting advanced IDV to keep you safe, or is it time to find one that does?
About the post:
Images and videos are generative AI-created. Image prompt: A meteor on a direct collision course with a small craftsman style house, about to make impact, streaks of flame coming from behind the meteor, the house stands no chance, dramatic scene, very cinematic, photorealistic. Tools: Midjourney, Luma.
About the author:
Josh Read is Chief Operating Officer at IDVerse. He has over 25 years of leadership experience in technology organisations including Equifax, KPMG Australia, Telstra Enterprise and Government, and Yellowfin Business Intelligence International. As COO, Josh supports and directs the global expansion of the company, building optimised business processes for IDVerse to become the global partner of choice for IDV and compliance.
