February 19, 2025
Artificial Intelligence Alone Not the ‘Silver Bullet’ as Compliance Chiefs Wrestle with Rising Costs and Complexity
- 87% of firms globally expect Know Your Customer Enhanced Due Diligence (KYC EDD) budgets to rise over the next 12 months.
- 90% say the volume of EDD requests has risen over the last three years.
- AI is viewed as an important tool to increase efficiency, but the human element is key to ensuring compliance accuracy and risk mitigation.
- AI, once safely implemented will speed up reporting, improve ongoing monitoring, identify hidden risks, and reduce overall program costs.
- Sanctions, data privacy and crypto were identified as the biggest hurdles in the KYC compliance space going forward.
Growing levels of financial crime and regulatory scrutiny are forcing organisations to step up spending on compliance, but they are less sold on AI as the standalone solution, according to a global survey of risk and compliance officers by LSEG Risk Intelligence.
The survey finds that 87% of respondents expect their organisation’s annual budgets for Know Your Customer Enhanced Due Diligence (KYC EDD) to increase over the next 12 months, with an average expected increase of 5.2%.
The average annual EDD spend is currently US$632,026 – rising to over US$900,000 for organisations that turn over more than US$1 billion. The demand for compliance checks has taken its toll, too – with 90% of respondents reporting an increase in requests over the last three years.
However, as compliance teams look to technology to streamline due diligence, the survey finds trusted human oversight is still paramount. 58% believe KYC EDD should be mostly or fully human-driven, compared to 42% who think KYC EDD should be either fully or mostly AI-automated.
Daniel Hartnett, Head of Enhanced Due Diligence at LSEG Risk Intelligence, comments: “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 a 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.”
Many respondents believe that once a responsible, safe strategy for AI risk mitigation is in place, AI will offer a range of core benefits in the EDD space, including:
- Faster turnaround times for generating comprehensive reports (cited by 41%).
- Ongoing monitoring and automatic updates of due diligence data (cited by 37%).
- An enhanced ability to uncover hidden risks or patterns (cited by 36%).
- Cost savings (cited by 35%).
- Although AI is viewed as an important tool to increase efficiency, the survey underscores that “Responsible AI” is key to ensuring compliance accuracy and risk mitigation.
Regulatory Pressures and Emerging Risks
As the compliance landscape evolves, organisations identified key concerns that will create challenges in the KYC EDD space moving forward:
- 49% highlighted increased global sanctions and watchlists.
- 48% selected increasing customer privacy concerns and data protection laws.
- 43% cited the expansion of digital currencies and crypto transactions.
In addition, respondents cited other growing concerns, such as emerging AI regulations and stricter AML rules.
Looking ahead
Over the next three years, organisations expect KYC EDD programs to be shaped by two key drivers:
- 52% highlighted an increased focus on identifying beneficial ownership and complex corporate structures.
- 50% cited a greater reliance on technology and data analytics to manage rising volumes of customer data.
As financial crime risks increase and regulations tighten, firms must adopt cost-effective and scalable due diligence solutions while ensuring they maintain compliance with evolving global standards.
Contacts
About the Survey
In late 2024, LSEG commissioned detailed research into the current and future KYC EDD landscape to distil insights into current views on EDD spend and processes, as well as expectations for future developments.
Our research gathered responses from 550 directors and other respondents with decision-making responsibilities across a range of key areas – from financial crime and compliance, to risk, fraud, legal, money laundering reporting, transaction monitoring, AML/KYC/CFT/CDD and sanctions.
About LSEG Risk Intelligence
LSEG Risk Intelligence provides a suite of solutions to help organizations efficiently navigate risks, avoid reputational damage, reduce fraud and ensure legal and regulatory compliance around the globe. From screening solutions through World-Check, to detailed background checks on any entity or individual through due diligence reports, and innovative identity verification, account verification and digital onboarding services – you can trust us to help you successfully manage your risk, so you can operate more efficiently, more effectively and more confidently. Learn more: lseg.com/risk-intelligence.
About LSEG
LSEG (London Stock Exchange Group) is a leading global financial markets infrastructure and data provider, playing a vital social and economic role in the world’s financial system.
With our open approach, trusted expertise and global scale, we enable the sustainable growth and stability of our customers and their communities. We are dedicated partners with extensive experience, deep knowledge and a worldwide presence in data and analytics; indices; capital formation; and trade execution, clearing and risk management across multiple asset classes.
LSEG is headquartered in the United Kingdom, with significant operations in over 60 countries across EMEA, North America, Latin America and Asia Pacific. We employ 25,000 people globally, more than half located in Asia Pacific. LSEG’s ticker symbol is LSEG.
