Fenergo, the leading provider of AI-powered solutions for Know Your Customer (KYC), Anti-money Laundering (AML) transaction monitoring and Client Lifecycle Management (CLM), today released its report 2024 The State of KYC: Essential Insights for Asset Managers. The survey of 450 C-Suite and executive leaders in the US, UK and Singapore revealed that costly manual data collection and fragmented workflows for investor management and financial crime are hindering their firms’ ability to scale, compete and remain compliant with evolving regulations.

37% of US firms spend more than $3,000 on a single KYC review for an institutional investor in multiple jurisdictions

Manual KYC and labor-intensive data collection processes are significant issues inhibiting operational efficiency for more than 72% of asset management firms with $51bn or more assets under management (AUM) in the UK, US and Singapore. Firms plagued by efficiency challenges are unable to control the costs of conducting KYC reviews, where US asset managers are absorbing the highest costs per KYC review at $2,664, 13% higher than the UK ($2,367) and 23% higher than Singapore ($2,159). “KYC is draining disproportionate ratios of compliance budgets, up to 40% on average for the largest firms with $500 billion plus in AUM, while smaller firms with $51-100 billion in AUM allocate 33% of total budgets for KYC. Asset managers are spending too much money and time on KYC/AML compliance processes, yet they’re still losing investors due to poor onboarding experiences. It’s no longer sustainable to throw bodies at the problem, given the dearth of anti-financial crime compliance professionals,” said Rory Doyle, Head of Financial Crime Policy at Fenergo. “It’s simply impossible for human beings to execute error-free complex processes like transaction monitoring and reporting that keeps up with regulatory shifts across jurisdictions.”

69% of US asset management firms lack adequate systems to respond to changing regulatory demands

Regulatory pressures are increasingly a driver for compliance responsiveness, however traditional and manual processes are a burden. 77% of global respondents reveal that their systems are not agile to meet evolving regulatory requirements.

In the US, upcoming FinCEN requirements around AML and KYC rules are expected to increase the compliance burden on asset managers. Many firms lack the technology needed to meet new requirements, such as those related to transaction monitoring and beneficial ownership reporting.

Additional new regulations have recently come into effect – or are in the pipeline – across regions including in the US, UK, European Union (EU) and Asia, which are impacting asset management organizations and their KYC responsibilities.

“Asset managers have been noticeably behind other financial sectors in digital transformation. Naturally, they will resist change until absolutely necessary. US asset management firms should now look to build automation into their processes before 2026, if not earlier,” commented Terry Flynn, Managing Director of Asset Management, Fenergo. “The survey shows that these firms are struggling with manual processes and outdated compliance technology; and this inefficiency and tech debt is hurting their ability to manage AML risk across the investor lifecycle at a time when regulators are paying closer attention. The lack of digitized, automated solutions not only creates risk management challenges but also creates an environment ripe for regulatory enforcement action and the ensuing reputational damage. The downstream impact of this operational inefficiency manifests itself in a poor investor experience and in the worst case, as 74% of asset managers have found, investor abandonment.”

Holistic, clear view of investors named biggest challenge in transaction monitoring

The State of KYC: Essential Insights for Asset Managers report exposed the critical disconnection across investor onboarding and ongoing monitoring processes. Many asset management firms indicated they struggle with disjointed KYC and transaction monitoring technology, preventing them from achieving a holistic view of investor risk. Integrating the systems produces a modernized, optimal KYC process, but the lack of unified investment data is a persistent issue among asset managers. Managing structured or unstructured data is the top transaction monitoring challenge for US firms (41%).

“There is a big opportunity for the asset management industry to increase automation to enhance efficiency, reduce errors and balance compliance demands with growth and profitability. Firms that take action before the competition will future proof themselves against regulation changes, as well as delivering operational efficiencies that save money and boost customer experience,” said Stella Clarke, Chief Strategy Officer at Fenergo.

In this report, Fenergo explores the key challenges that asset managers in the US, UK and Singapore face in their KYC onboarding and reviews processes and offers potential solutions. Censuswide surveyed 450 Chief Operations Officers, Chief Compliance Officers, Chief Risk Officers, Chief Information Officers, Chief Technology Officers and Client Services Team (from vice president level and above) in tier 1 asset management firms with $51bn or more assets under management (AUM) in the UK, US and Singapore on behalf of Fenergo. Interviewees were surveyed in September 2024.