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European Banks are Spending AML and KYC budgets on Manual Processes, Ondato finds

European banks are spending most of their Anti-Money Laundering (AML) and Know Your Customer (KYC) budgets on manual processes, according to technology company Ondato

According to Ondato, manual processes are unable to scale to meet the costs and risks of increased compliance demands. The technology company, which streamlines AML and KYC processes, has released its newest report titled: ‘The real cost of KYC & AML compliance for the financial sector‘.

The report finds that €14.25million per year has been spent on average by Europe’s largest banks on AML-related expenses. Of these budget allocations, the money being directed towards AML compliance is mostly invested in the wages of compliance specialists.  Banks are hiring specialists to meet current demands; instead of investing in scaleable automation that can also meet future challenges.

Considering the average fine for German banks was €52.5million in 2020, a €14.25 million average is not particularly large. The global cost of non-compliance fines reached as high as €13.6billion.

Ondato’s report also shows that, on average, KYC accounts for 40 per cent of all AML spending. Because KYC is a complicated process to prevent forged documents, a lot of funding is put into related programs. In fact, the average daily spend for them was found to be €22,984.

Only 26 per cent of this daily funding is currently spent on solutions that could reduce operating costs and scale alongside future growth and new Liudas KanapienisLiudas Kanapienisdemands.

‘Manual KYC is simply ineffective’
Liudas Kanapienis, Ondato
Liudas Kanapienis, CEO and co-founder of Ondato

Liudas Kanapienis, CEO and co-founder of Ondato, gave his view on the findings. Kanapienis commented: “Manual KYC is simply ineffective. It’s time-consuming and leaves banks susceptible to human error, further inflating the cost of compliance.

“In addition, manual processes are not easily scalable, as banks around the world discovered as they have been overwhelmed by the unprecedented increase in sanctions imposed on Russia following its invasion of Ukraine.

“Compliance specialists simply cannot handle the current workload and normal banking operations are being greatly slowed down as a result.”

Ninety per cent of respondents to an Accenture study expect a 30 per cent budget increase over the next two years. Seventy-two per cent of the same sample said that compliance tech budgets had not changed in the past year.

Earlier this year, Liudas Kanapienis spoke to The Fintech Times about Ondato’s role in the industry. Click here to read more.


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