European banks don't prepare for upcoming fraud risks, Ondato says

Friday 25 November 2022 09:36 CET | News

UK-based fraud prevention company Ondato has published a new report on how European banks fail to plan for future KYC and AML risks.


Ondato’s research reveals that Europe’s largest banks are spending an average of EUR 14.25 million per year on AML-related expenses. However, the money being allocated to AML compliance is largely at the level of operating costs, mostly the wages of compliance specialists, to try and keep up with current demands, rather than automation investment that can scale to meet future challenges.


Ondato has released a new report on how European banks fail to plan for future KYC and AML risks.

KYC typically accounts for 40% of all AML spending, says the report, as it is a complicated process to prevent forged documents, to spot stolen identities, and to uncover schemes to hide the true source of assets. As a result, each day, an average bank spends EUR 22,984 on KYC programmes, but only 26% of that is invested in technological solutions that could reduce operating costs and scale to keep up with future growth and new compliance demands.

Not focusing enough on automation

The headline average spend of EUR 14.25 million identified by Ondato is surprisingly small when the average fine for German banks in 2020 was EUR 52.5 million and the global cost of non-compliance fines reached EUR 13.6 billion. On top of that, the imbalance between growing AML operating costs and static automation budgets seems likely to continue without a radical change of approach: a 2022 study by Accenture found that 90% of respondents expect compliance operating costs to increase by up to 30% until 2024. And yet 72% of the same sample admit that compliance tech budgets have not changed in 2022.

Ondato’s officials stated that manual KYC is simply ineffective. It’s time consuming and leaves banks susceptible to human error, further inflating the cost of compliance. In addition, manual processes are not easily scalable, as banks around the world discovered as they have been overwhelmed by the unprecedented increase in sanctions imposed on Russia following its invasion of Ukraine. Compliance specialists simply cannot handle the current workload and normal banking operations are being greatly slowed down as a result.

New customer onboarding delays created by compliance backlogs is also resulting in substantial financial losses for banks. Increasing legislation continues to lengthen the KYC procedure, putting banks’ customers’ patience to the test. Research shows that if the application takes 10 minutes or more to complete, 40% of clients will abandon it. The problem resulted in USD 3.3 trillion of lost revenue in 2019 alone.

About Ondato

London-headquartered Ondato is a tech company that streamlines KYC and AML-related processes. Ondato provides technological solutions such as digital identity verification, business customer onboarding, data validation, authentication, and more. These provide high standards of KYC online or offline on-boarding for all business and customer types, orchestrated from a single interface. Ondato is turning compliance into a business benefit for its customers, helping to create a better and safer environment for organisations and individuals.

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Keywords: fraud prevention, KYC, AML, banks, digitalisation
Categories: Fraud & Financial Crime
Companies: Ondato
Countries: Europe
This article is part of category

Fraud & Financial Crime


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