Fenergo’s latest study has shed light on a concerning trend for banks in Britain and globally.
The research reveals a notable increase in the cost and time associated with performing Know Your Customer (KYC) tasks. According to Fenergo, the leading provider of KYC and Client Lifecycle Management (CLM) software solutions, the average cost to complete a KYC review for a corporate client has risen significantly. In 2023, this figure stands at $2,598, marking a 17% increase from the previous year. British banks are particularly impacted, incurring an average cost of $2,613 per KYC review, up by 19% year over year.
Apart from the escalating costs, the duration required to complete KYC checks is also extending. On a global scale, banks now take an average of 95 days for a KYC review, an increase from 84 days in 2022. This delay is more pronounced in the UK, with the process taking 17 additional days compared to last year. Further compounding these challenges is a worsening talent shortage, with the global average number of people involved in KYC tasks dropping by 14%. However, in the UK, there’s been a marginal increase (1%) in staff numbers.
Nearly half of the banks worldwide (48%) acknowledged losing clients due to inefficient onboarding processes. In the UK, this percentage is slightly lower at 39%. These figures underline why UK firms are placing a high priority on addressing financial crime risk through technology investments. Forty percent of respondents are focusing on this area, possibly influenced by the UK’s reputation as a money laundering hub.
The Financial Conduct Authority (FCA) in the UK is intensifying efforts against money laundering. Between January and October 2023, the FCA imposed fines totalling $410m on financial institutions for failures in anti-money laundering (AML) compliance. The FCA is also focusing on cryptocurrency businesses, especially those involved in international transfers, with the recent implementation of the ‘Travel Rule’ in September.
Stella Clarke, Chief Strategy Officer at Fenergo, commented on the current state of the industry. “Financial institutions globally are yet to make significant strides in streamlining KYC and anti-money laundering processes,” she said. “In the UK, most banks still depend on manual methods for KYC, leading to high onboarding costs, increased risk of human error, and regulatory breaches. This approach will become increasingly untenable as financial regulators intensify their focus on curbing money laundering.”
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