Managing KYC and AML in 2023: Trends and Difficulties in the Banking Sector

In 2023, the world of Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance is witnessing a new set of challenges and trends, according to a recent survey conducted by Fenergo, as outlined in Fintech Global News. The survey, which involved over 1,100 C-suite executives from global Financial Institutions (FIs), sheds light on the evolving landscape of anti-financial crime processes. Fenergo’s comprehensive report titled ‘KYC in 2023’ offers valuable insights by comparing the latest data with that of the previous year.

This year’s banking industry finds itself navigating a complex environment characterized by persistent inflation, geopolitical tensions, stricter regulations, and increased competition from digital-first FinTech companies. FIs are confronted with the dual challenge of meeting growing KYC demands while grappling with limited resources and outdated technology. Nevertheless, the report also highlights positive developments in technology adoption and regional efficiency improvements, resulting in a reduction in regulatory enforcement actions.

Historical data from Fenergo reveals a notable shift in how financial institutions approach regulatory compliance. The report points out a significant 22% reduction in enforcement actions for non-compliance in 2022, amounting to $4.2 billion, compared to the previous year. Globally, the KYC workload has somewhat decreased, with a 14% decline in staff numbers dedicated to KYC-related tasks. However, the cost of conducting a single KYC review has risen by 17% since 2022, averaging $2,598. The reliance on manual processes plays a role in driving these high costs.

In addition to these challenges, FIs must prepare for upcoming regulatory changes, including those introduced by the Anti-Money Laundering Act (AMLA) of 2020, along with updates in beneficial ownership reporting and enhanced whistleblower protections. These reforms, particularly in the European Union, Canada, and Australia, introduce layers of complexity and increased costs in customer acquisition and maintenance.

Fenergo’s report dives into the adaptations FIs are making in their KYC and AML operations to navigate these regulatory shifts. It explores various aspects such as the evolution of KYC practices in commercial and corporate banking, the rising costs associated with KYC, the key areas for technology investments in 2023, and the impacts of global financial and geopolitical challenges.