Trusted human oversight is still paramount as compliance chiefs wrestle with rising costs and complexity, according to recent global survey
Growing levels of financial crime and regulatory scrutiny are forcing organisations to step up spending on compliance, but they are less sold on artificial intelligence (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$1bn. 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.