Navigating KYC and AML in 2023: Trends and challenges in the banking sector

Navigating KYC and AML in 2023: Trends and challenges in the banking sector

2023 has brought forward unique challenges and trends in the KYC (Know Your Customer) and AML (Anti-Money Laundering) landscape, as revealed in a survey conducted by Fenergo.

Over 1,100 C-suite staff from global Financial Institutions (FIs) participated in this research, offering insights into the evolving anti-financial crime processes. Fenergo’s report, ‘KYC in 2023’, available for download, provides a comprehensive analysis comparing the latest data with that of the previous year.

This year’s banking industry is navigating a complex environment marked by persistent inflation, geopolitical tensions, stricter regulations, and competition from digital-first FinTechs. FIs face the dual challenge of meeting growing KYC demands with limited resources and outdated technology. However, the report also highlights positive strides in technology adoption and regional efficiency improvements, leading to a decrease in regulatory enforcement actions.

Historical data from Fenergo indicates a shift in how financial institutions approach regulatory compliance. The report notes a significant 22% reduction in enforcement actions for non-compliance in 2022, totaling $4.2bn, compared to 2021. The KYC workload has somewhat lessened globally, with a 14% drop in staff numbers dedicated to KYC tasks. However, the cost of conducting a single KYC review has risen by 17% since 2022, now averaging $2,598. The reliance on manual processes is a contributing factor to these high costs.

FIs must also brace for upcoming regulatory changes, including those under the Anti-Money Laundering Act (AMLA) of 2020, along with updates in beneficial ownership reporting and enhanced whistleblower protections. These reforms, particularly in the EU, Canada, and Australia, add layers of complexity and cost in customer acquisition and maintenance.

Fenergo’s report delves into the adaptations FIs are making in their KYC and AML operations amidst these regulatory shifts. It covers various aspects such as the evolution of KYC practices in commercial and corporate banking, the escalating costs of KYC, the focus areas for tech investments in 2023, and the impacts of global financial and geopolitical challenges.

Read the full story here.

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