DOW JONES RISK & COMPLIANCE

Introduction

These are the results of 1LoD’s inaugural Financial Crime Benchmarking Survey & Report. It combines the results of a survey of more than 25 organisations – taken from the Tier 1 and Tier 2 sectors in the US, Europe, and Asia – and conversations about the results with financial crime leaders at those and other institutions. It incorporates a host of new datapoints designed to help you benchmark your own anti-money laundering (AML) and know your customer (KYC) processes and technology against your peers.

Operating Model

Key Takeaways

  • 75% of banks identify high manual workloads as a key operating challenge in AML/KYC.
  • 53% of banks anticipate buying KYC automation technology in the next three years.
  • Over 50% of banks rely on manual intervention for more than half of their AML/KYC processes.
  • 38% of banks automate less than a quarter of their AML/KYC processes.

There are three big-picture takeaways from the survey and the accompanying interviews:

  1. Banks are committed to getting AML/KYC right, and for many, budgets are rising.
  2. AML can make huge efficiency gains by eliminating manual processes.
  3. Banks anticipate buying technology upgrades across all categories of AML/KYC.

Operating Model Challenges

AML/KYC is an interesting case study in the problems of dividing functions neatly between the 1st and 2nd lines of defence. For the most mature institutions, there are AML teams in both the 1st and 2nd lines. As one compliance and financial crime chief noted, "The 1st line teams are managing risk day to day, while the 2nd line teams are oversight and challenge."

CHART 3
What is the size of your AML compliance team?

Staffing, Roles, and Responsibilities

The survey shows that AML/KYC leaders uniformly rate the expertise of their teams as high or very high. 88% of AML/KYC team members have more than four years’ experience.

Considerations include the challenges in recruiting the right talent for financial crime roles. 38% of banks indicate that balancing workloads with the necessity for transformation is a key challenge, and staff burnout is a real issue.

Training and Awareness

A key element of maintaining AML/KYC compliance is training. The survey indicates that just 35% of respondents use regular formal training sessions, while 81% favour an irregular, ‘as needed’, approach to training about regulations.

Technology

The scale and complexity of AML/KYC compliance and risk management have made it a prime candidate for the use of technology. However, 56% of banks are either neutral or dissatisfied with their current AML and KYC technology solutions.

Removing Manual Processes

88% of firms say that more than half of their total AML/KYC processes still need to be automated. 60% of banks find that more than 50% of their AML and KYC processes still rely on manual intervention despite technological improvements.

CHART 19
How satisfied are you with your current AML and KYC technology solutions?

Investing in Workflow Tools

The client lifecycle in KYC is extremely complicated and requires enhanced tooling for better management.

Half (50%) of respondents anticipate spending on media screening in the next three years to improve processes.

Technology Investment Choices

Banks are planning to invest in transaction monitoring (TM) systems and automation to enhance their AML/KYC operations. 75% of respondents anticipate upgrading TM systems, 69% focus on KYC automation, and many see operational efficiency as crucial for these investments.

Oversight, Budget, and Resources

An overwhelming majority (94%) of financial crime leaders report that senior management awareness and effectiveness in relation to financial crime risks is good or very good. Senior management is very involved in making decisions about AML and KYC processes in 56% of the banks surveyed.

Mixed Picture Going Forward

88% of AML/KYC staff say their levels are sufficient to manage processes effectively. However, there is still uncertainty about future funding and effectiveness as banks navigate compliance complexities.