Financial institutions worldwide are facing a critical juncture as client losses and compliance costs surge alongside the rapid adoption of AI, according to new global research from Fenergo.
The report, based on a survey of 600 senior decision-makers across banks, asset managers and fund administrators, reveals that 70% of firms lost clients in the past year due to inefficient onboarding — the highest rate ever recorded. This marks an increase from 67% in 2024 and 48% in 2023, with onboarding abandonment rates now averaging around 10%.
Fenergo’s analysis underscores the intensifying regulatory pressure across jurisdictions. The firm’s 2024 AML fines analysis recorded US$4.6bn in global penalties, a decline from 2023’s record US$6.6bn, but with North America accounting for a striking 94% of the total. In the first half of 2025 alone, global fines hit US$1.23bn — a 417% rise compared to the same period in 2024 — largely driven by sanctions-related enforcement actions in North America.
Operational costs remain a major challenge, with the average annual spend on AML and KYC operations now reaching US$72.9m per institution. UK firms report the highest expenditure at US$78.4m, followed by the US at US$72.2m and Singapore at US$68.2m.
The adoption of AI and automation technologies is accelerating across compliance functions but remains inconsistent. The use of advanced AI tools in KYC and AML processes has nearly doubled, rising from 42% in 2024 to 82% in 2025. Singaporean firms lead the way at 92%, ahead of the US (79%) and the UK (77%). Despite this progress, automation of periodic KYC reviews averages only around one-third, suggesting that many firms are yet to fully leverage technology to streamline compliance.
Performance varies significantly by geography. UK corporate banks report the longest onboarding times, averaging more than six weeks. Singaporean institutions, though faster overall, still face high client attrition rates — 76% of firms reported losing clients due to slow onboarding, down from 87% the previous year. In contrast, US firms cite financial crime prevention as the top AI investment priority, with 65% allocating significant budgets to this area despite persistent challenges in managing legacy technology stacks.
Commercial and corporate banks continue to bear the heaviest operational burden, while asset managers have made strides in automating periodic reviews. However, asset servicers remain hindered by the longest onboarding cycles and the highest client abandonment rates across all sectors.
Fenergo director of strategic thought leadership and regulatory affairs Tracy Moore said, “Financial institutions are in an arms race to modernize compliance. The sheer cost of operations, averaging nearly USD 73 million per firm, coupled with record client abandonment rates shows that old approaches are no longer sustainable. To keep pace, firms need to embed intelligence into every layer of their client lifecycle: streamlining onboarding, scaling periodic reviews, and ensuring data is regulatory-ready at all times. To that end, AI has become the critical lever for resilience, efficiency and competitiveness.”
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