Growing levels of financial crime and regulatory scrutiny are driving organisations to increase their compliance spending, though many remain cautious about relying solely on AI as a solution.
According to a global survey of risk and compliance officers conducted by LSEG Risk Intelligence, 87% of respondents expect their organisation’s annual budget for Know Your Customer Enhanced Due Diligence (KYC EDD) to rise over the next 12 months, with an average projected increase of 5.2%.
Currently, the average annual EDD expenditure stands at US$632,026, with larger organisations – those generating over US$1 billion in revenue – spending over US$900,000.
The growing demand for compliance checks has also placed a burden on organisations, as 90% of respondents reported an increase in requests over the last three years.
As compliance teams turn to technology to streamline due diligence processes, the survey highlights that trusted human oversight remains essential.
A majority – 58% of respondents – believe that KYC EDD should be mostly or fully human-driven, whereas 42% think it should be either fully or mostly AI-automated.
Daniel Hartnett, Head of Enhanced Due Diligence at LSEG Risk Intelligence, emphasises the need for balance, stating,
“Our research shows that higher spend and rising volumes of Enhanced Due Diligence (EDD) requests are anticipated – and as many organisations struggle with doing more with less, there is now an urgent need to control costs, while remaining compliant and not compromising the quality of EDD.”
“While at first glance, AI appears to be a silver bullet, a more nuanced approach is needed – one that is human-centric in nature. AI undoubtedly offers a range of core benefits in the EDD space, but it must be implemented safely and responsibly, with trusted human oversight throughout. To do otherwise will lead to more risk, not less.”
Despite scepticism around full automation, many respondents acknowledge the advantages AI can bring to the EDD process once a responsible and safe strategy for AI risk mitigation is in place.
The key benefits cited include faster turnaround times for generating comprehensive reports (41%), ongoing monitoring and automatic updates of due diligence data (37%), an enhanced ability to uncover hidden risks or patterns (36%), and cost savings (35%).
While AI is increasingly seen as a tool to improve efficiency, the survey underscores that “Responsible AI” is crucial to ensuring compliance accuracy and mitigating risks.
The evolving compliance landscape is also marked by increasing regulatory pressures and emerging risks.
Organisations highlighted several key concerns that will challenge the KYC EDD space moving forward, with 49% pointing to increased global sanctions and watchlists, 48% citing growing customer privacy concerns and data protection laws, and 43% identifying the expansion of digital currencies and crypto transactions as a significant factor.
Additional concerns include new AI regulations and stricter anti-money laundering (AML) rules, which further complicate compliance efforts.
Looking ahead, organisations expect KYC EDD programmes to be shaped by two primary factors over the next three years.
More than half (52%) of respondents believe there will be an increased focus on identifying beneficial ownership and complex corporate structures, while 50% anticipate a greater reliance on technology and data analytics to manage the rising volume of customer data.
As financial crime risks grow and regulations tighten, firms must adopt cost-effective and scalable due diligence solutions while ensuring compliance with evolving global standards.
Featured image credit: edited from freepik
