Costs of processing AML KYC are spiralling out of control, and a straightforward digitalisation of existing operations is no longer sufficient to tame these costs. A change of paradigm is now required. That is our belief at Reseo.
In today’s world, it is hard to keep abreast with the changing technology landscape in the investment management industry, let alone the regulation that aims to ensure that technology is not having negative impacts on the investor.
AI is portrayed as the holy grail and at the forefront of every technological development, whereas the EU is issuing a myriad of regulations to ensure the technology is used ethically, which benefits the interest of the consumer and takes into account the privacy of data of individuals.
Some of the regulations already in force or are coming into force in this area are the AI Act (Nov-‘26), Cyber Resilience Act (Dec ‘27), Financial Data Access Regulation (FIDA, Jul ‘25), European Data Act (Sept ’25) and the recently enforce DORA (Jan ’25).
It all can give a feeling that whenever a new technology is being deployed to either improve products, increase client services or save costs, additional costs are incurred to comply with new or changed regulations.
AML KYC cost
The above is definitely applicable to complying with AML KYC regulations. The investment management industry being used for Money Laundering / Terrorist Financing (MLTF) is getting even more sophisticated and could undermine the trust, which is paramount, in the industry. The projected total cost of financial crime across financial institutions worldwide is $274.1 billion, which is an increase of $60 billion in only two years. On top of that fines reached a whopping peak of $12 billion In 2021[1].
Against this sophistication of MLTF stands the still “paper” based process of gathering data to combat MLTF combined with recording the assessment through workflow driven files and data depositories, making for a high risk and costly compliance with regulation.
Digitalisation has been focussing on existing workflows and has not necessarily addressed the inherent inefficiencies of those workflows, whereas the General Data Protection Regulation (“GDPR”) are a further spoke in the wheel. This limits the exchange of data, causing the industry to continue to duplicate data exchange, verification and approval.
A rethink is due
We are all used to travelling the globe and handing over our passports at the border (sometimes with a visa obtained through the internet) to get access to the country we want to visit. Access to multiple countries with only one border check is possible through agreements like Schengen. Yes, participation and collaboration of all stakeholders is paramount and necessary and proven possible.
If the EU can achieve this why would the investment management industry not be able to get this done as well ie create something similar for getting easy access to financial services and investing.
Automating or digitalising is already an inefficient process, and workflows do not sufficiently address the spiralling costs, the fast changing environment and the increasing risk posed by sophisticated MLTF. A rethink is due.
At Reseo we think this is possible and to that end, we have created the e-ID, a go anywhere digital corporate passport. No endless requesting and sending around the documents and data that need to be verified, they are all captured and kept up to date in one corporate e-ID, verified by the e-ID Owner, confirmed by Reseo and approved by the e-ID User.
Taking out duplication, using state of the art AI, creating transparency for all participants, making compliance perpetual, reducing materially the cost and keeping or even heightening the trust in the industry and all its stakeholders.
A worthwhile cause to change the paradigm.
[1] LexisNexis: True cost of financial crime compliance global study, 2023
