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  5. IT and Operational Spending in AML-KYC: A Global Perspective

IT and Operational Spending in AML-KYC: A Global Perspective

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10 September 2019
Arin Ray
Neil Katkov

Celent estimates that financial industry spending on AML-KYC compliance technology, operations, and data will reach US$32.1 billion globally in 2019.

Key research questions

  • How much do financial institutions spend on AML-KYC technology?
  • How much do financial institutions spend on operations?
  • How will spending evolve?

Abstract

The complex dynamics of technology and regulatory evolution have placed unprecedented demands on banks’ Know Your Customer (KYC) and anti-money laundering (AML) technology and operations. As a result, spending in AML-KYC has exploded in the last decade. Celent estimates that spending on technology used in AML-KYC compliance will reach US$8.3 billion and that spending on operations will rise to US$23.4 billion globally in 2019.

Regional Drivers of AML-KYC Technology Spending

Region

Spending Drivers

North America

High regulatory scrutiny.

High technology adoption and spending of very large global and regional institutions.

Numerous small banks with relatively high or moderate degrees of technology sophistication.

Europe

Market practices and spending drivers in western Europe similar to North America.

Eastern European countries typically lagging in technology adoption and spending.

Asia

Fragmented levels of AML frameworks and technology adoption across the region.

Developed Asian markets have high technology adoption. Others are still developing with simple banking services and limited technology adoption.

Rest of the World

Limited technology adoption in AML.

Early stage of regulatory development.

Source: Celent

We are at a critical juncture in AML technology. The first generation of rules-based technology is proving to be inadequate in managing the challenges of the digital era. Therefore, financial institutions are investing in next generation technology not only to improve the efficiency and effectiveness of AML programs today, but also as an investment that will contain and potentially reduce the ballooning operational costs.

This report provides Celent’s estimates of spending on AML-KYC technology and operations by financial institutions worldwide, including banks, insurance companies, broker-dealers, and wealth and asset management firms. The report presents global estimates as well as detailed breakdowns of:

  • Spending by global region: North America, Europe, Asia, and the rest of the world.
  • Functional distribution of spending with focus on three key AML-KYC components: KYC-CDD, sanctions screening, and transaction monitoring.
  • Technology spending breakdown by: internal spending, hardware, external software, and external services.
  • Operational spending trends (in addition to technology spending).
  • Spending according to the type and size of financial institution.
  • Spending on new initiatives vs. run-the-bank maintenance activities.
  • Historical spending growth trends and estimates for future growth.
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