Reported by 1LOD

(Summarized version featured below)

The 2025 Financial Crime Benchmarking Survey, conducted by 1LoD, gathers insights from over 25 financial institutions across the US, Europe, and Asia. It benchmarks AML (Anti-Money Laundering) and KYC (Know Your Customer) processes and technology, emphasizing that despite regulatory scrutiny and increasing complexity, most banks continue to invest heavily in AML/KYC capabilities. The survey reveals that 94% of institutions face high manual workloads in these areas, with more than half of AML/KYC processes still reliant on manual efforts. As a result, there’s a strong push toward technology upgrades, especially in areas like transaction monitoring (TM), KYC automation, and workflow tools, with 80% of respondents indicating technology as their top investment priority.

The operating models in banks vary but are commonly split between the first and second lines of defense, with compliance and risk functions often divided. While many larger institutions have centralized KYC operations, there’s little appetite for outsourcing, especially among bigger players. Operational inefficiencies remain a dominant concern, with manual processes affecting onboarding speed, increasing error rates, and leading to inconsistent implementation across regions. While most institutions only adjust their AML policies annually, almost 90% conduct yearly audits of their operating models, indicating a structured but somewhat rigid compliance approach.

In terms of staffing, banks generally have experienced and stable AML/KYC teams. Over 80% of personnel have more than four years of experience, and turnover rates are low. However, leaders express concern that low attrition may hinder innovation and diversity of thought. Recruiting skilled talent is difficult, and balancing heavy workloads during technology transitions is a major challenge. Training methods vary, with many relying on informal or e-learning methods. Although AML/KYC teams are seen as effective, there’s tension between the need for deep expertise and the risk of stagnation due to limited turnover and evolution.

Technology implementation remains inconsistent. Many banks are dissatisfied with their legacy AML/KYC systems, citing poor integration, limited scalability, and inflexibility. Most firms use third-party solutions and cloud services, with RPA, AI, and ML gaining ground. There’s a major push to automate high-friction areas like TM and adverse media screening. However, banks still face hurdles with digital onboarding, document verification, and client resistance to technological changes. Tools like LLMs are being used to streamline report writing and alert prioritization, and while AI is helping reduce false positives, explainability and data quality remain crucial for regulatory acceptance.

Finally, oversight and budgeting reflect a strong institutional commitment to AML/KYC. A large majority of respondents rate board awareness and involvement as high, and most report adequate staffing and funding levels. While some banks have seen budget decreases due to completed remediation projects, others—especially mid-tier institutions—expect to increase spending to align with regulatory expectations and technology upgrades. There’s growing recognition that AML/KYC is more than a compliance obligation—it’s a business risk. Still, institutions remain cautious about future investment returns, particularly in emerging areas like perpetual KYC, where the full regulatory impact and cost implications are not yet clear.

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