Outsourcing AML Operations: Why Banks Turn to Managed Services Providers

Outsourcing AML operations is becoming a strategic move for many banks as compliance pressures continue to rise. New data from a recent report shows that global spending on third-party AML systems is expected to grow by 121%, increasing from $33.9 billion in 2025 to over $75 billion by 2030. This increase is largely going to be driven by persistent weaknesses in transaction monitoring and beneficial ownership transparency.

As regulatory expectations increase and FinCrime methods transform, institutions are facing rising operational costs and resource gaps. Many are responding by outsourcing AML operations to managed service providers that combine automation, scale, and domain expertise.

This shift offers a way to run compliance more effectively, with stronger oversight and better performance. In this article, we explore why banks are increasingly choosing to outsource AML operations, what benefits this model offers, and how to decide when it's the right time to make the shift.

Why Banks Outsource AML Operations In 2025

Outsourcing AML operations has become a necessary response to the rising complications of FinCrime regulations, increasing operational costs, and ongoing talent shortages, which are forcing institutions to reevaluate how they manage AML functions. What was once exclusively handled in-house is now being supported by managed service providers that offer scale, automation, and specialized knowledge.

Regulatory Pressures Are Increasing

Regulatory frameworks like the EU’s 6th Anti-Money Laundering Directive and the U.S. Anti-Money Laundering Act have expanded compliance requirements. These rules demand faster decision-making, deeper reporting, and stricter accountability. Managed service providers help banks stay compliant by delivering timely reporting, audit readiness, and consistent adherence to evolving regulations.

AML Talent Remains Scarce

The demand for AML professionals continues to outpace supply. High turnover, a shortage of experienced candidates, and rising salaries create challenges for institutions. A recent survey found that AML functions experience some of the highest turnover in the financial sector, with job switchers receiving significant pay increases. Outsourcing gives banks access to skilled analysts without the hiring and retention burden.

Operational Processes Are Still Inefficient

Many institutions still depend on manual processes for transaction monitoring, sanctions screening, and customer due diligence. Managed service providers bring structured workflows and automation that improve accuracy, reduce delays, and simplify reporting.

Outsourcing Offers Structure, Speed, and Scale

Managed services allow banks to focus on risk oversight while execution is handled by experts. Providers deliver consistent outcomes through proven methodologies, trained teams, and automated systems. A recent study found that outsourcing AML operations led to a drop in operational costs and an increase in monitoring efficiency.

Banks are outsourcing AML not to switch responsibility but to strengthen their ability to manage compliance demands that have outgrown traditional internal models.

When to Consider a Managed Services Provider

Financial institutions are facing more pressure than ever to deliver faster, smarter, and more accountable compliance outcomes. Outsourcing AML operations is increasingly being viewed as a strategic decision.

In a recent report, 88% of global business leaders said managed services deliver long-term cost advantages. However, cost reduction wasn’t the top goal. What ranked even higher was the ability to launch capabilities faster and gain better access to specialist talent. 

Here are key situations where bringing in a managed services provider makes strong operational and strategic sense:

1. When regulatory complications keep rising

Regulatory bodies continue to update, intensify, and expand their AML frameworks. Institutions are expected to monitor more channels, report faster, and provide deeper documentation. 

If your internal compliance team is stretched thin trying to keep up with evolving standards, external providers can help absorb those complications. They often bring purpose-built solutions, regulatory intelligence, and industry best practices that are difficult to build internally on a short timeline.

2. When you’re stuck with outdated systems

Many AML teams still operate with fragmented or legacy systems that don’t integrate well. If analysts are switching between disconnected tools, compiling spreadsheets manually, or struggling with slow case management platforms, performance suffers. 

Managed services providers offer up-to-date technologies that come pre-integrated with case workflows, risk scoring, and reporting features. These tools are more efficient and also reduce compliance gaps.

3. When scaling talent becomes difficult

Hiring skilled AML professionals is not straightforward anymore. Institutions are moving away from relying on low-cost delivery models and instead seeking access to highly specialized roles like data scientists, financial crime analysts, and regulatory specialists. 

Finding and retaining this talent is expensive and leads to unproductivity. Managed service providers already have these teams in place, trained on the latest risk models and tools, and ready to engage without delay.

4. When cost predictability matters

Managing compliance costs is about more than reducing expenses. It’s about creating a stable, predictable structure that allows long-term planning. 

Outsourcing AML operations helps convert fluctuating internal costs into more transparent external service agreements. Institutions can free up internal resources and focus on value-added areas such as internal audit strategy, product compliance reviews, or executive-level risk governance.

5. When speed and responsiveness are becoming priorities

If your team is slow to onboard new regulations, respond to emerging threats, or adjust workflows, this limits your agility. AML must evolve with changes in risk typologies, digital banking patterns, and cross-border regulations. Managed providers are built to adapt quickly.

Knowing when to outsource AML operations often comes down to recognizing internal limits early. Institutions that act proactively gain compliance support and increased resilience and adaptability in a highly regulated and rapidly evolving environment.

Signs Your AML Operation Needs External Support

It’s not always obvious when an internal AML program is under strain. This slows down compliance, increases risk exposure, and draws attention from regulators. Recognizing these signs early can help you act before those problems escalate. For many banks, these issues are what first lead them to explore outsourcing AML operations.

Based on a report's findings, the pressure to deliver faster, cleaner, and more consistent compliance outcomes is growing, but internal teams are not always equipped to meet that demand on their own.

Here are some of the clearest indicators that your AML operation could benefit from external support:

1. Your backlog of alerts is growing, not shrinking

A growing queue of unresolved alerts or incomplete investigations is one of the earliest warning signs. It means your team doesn’t have the capacity to keep up with daily volumes, increasing the risk of delayed responses, missed risk signals, and audit failures. Over time, it also reduces confidence in the institution’s ability to manage risk effectively.

Managed services providers are designed to scale quickly. They bring in trained analysts and structured workflows that help reduce alert queues and ensure timely reviews without compromising quality.

2. Investigations lack consistency

When similar customer profiles or transactions are handled differently by different analysts, it points to a lack of standardized decision-making. Inconsistency affects internal confidence in your compliance outcomes and creates audit risks. Regulators look closely at whether institutions apply the same logic across all investigations.

External providers apply repeatable methods, peer-reviewed processes, and documented procedures that improve consistency. These measures support defensible case outcomes and stronger audit readiness.

3. False positives are consuming your analysts’ time

A high false-positive rate means your team is spending too much time on alerts that don’t require action. This results in operational drag and distracts analysts from real threats. It also leads to fatigue and burnout, especially when workflows rely heavily on manual reviews.

Outsourced teams often bring more refined alert tuning, analytics, and triage capabilities that reduce false positives. This allows in-house staff to focus on high-priority cases and strategic decision-making instead of clearing low-risk noise.

4. Staff turnover is becoming a problem

High attrition in AML teams is increasingly common, and it has a compounding effect. Every departure slows productivity, increases onboarding time for replacements, and risks institutional knowledge loss. Recruiting replacements in this field is also expensive, especially for specialized roles.

Managed AML providers already have teams trained, certified, and ready to operate. They offer business continuity and stability when internal teams are in flux or stretched too thin.

5. Technology is outdated, and automation is limited

If your team still relies heavily on spreadsheets, manual SAR generation, or fragmented tools, you are slowing down operations and increasing the risk of errors. According to a report, firms that continue to rely on outdated infrastructure struggle to meet modern compliance expectations and often face higher operational costs in the long run.

By outsourcing AML operations, you gain access to purpose-built compliance platforms that centralize data, streamline workflows, and integrate automation in key areas such as case management, alert reviews, and reporting.

6. Your regulatory risk profile is worsening

Repeated findings during exams, missed deadlines, or escalating scrutiny from regulators can indicate that internal processes are not meeting expectations. These issues are often symptoms of deeper systemic problems, insufficient resources, poor documentation practices, or a lack of review capacity.

External providers are experienced in working within regulator-defined standards. They often have audit-ready processes in place and know how to structure documentation, timelines, and narratives to align with expectations across multiple jurisdictions.

How Lucinity Delivers a Scalable Model for Outsourcing AML Operations

Lucinity has long been recognized for its advanced tools supporting AML investigations, including its Luci AI agent, Case Manager, and Customer 360 capabilities. But the company is now moving into a broader role: running compliance operations end-to-end as part of its Human AI services.

Rather than simply selling software, Lucinity now operates as a managed services provider, taking over a bank’s AML and KYC operations under a service-level agreement. This shift allows financial institutions to retain oversight and governance while benefiting from Lucinity’s automation-first approach, which reduces operational effort by up to 90% and increases consistency and auditability across investigations.

To learn more about Lucinity’s tools and upcoming operating model, visit Lucinity today!

Conclusion

Compliance leaders today face mounting pressure to maintain effective AML operations while managing rising volumes, stricter regulations, and growing resource constraints. In this environment, outsourcing AML operations has become a strategic move for banks seeking performance, scalability, and cost control without compromising on quality.

Instead of expanding internal headcount or stretching underpowered teams, institutions are partnering with providers that offer full operational control, real-time visibility, and ongoing optimisation. The right outsourcing model does more than cover gaps. It improves outcomes, supports regulatory trust, and adapts as risks change.

Here are four key takeaways for decision-makers evaluating this shift:

1. Outsourcing AML operations enables institutions to reduce manual workloads, gain regulatory consistency, and scale resources efficiently.
2. Managed service providers offer integrated tools and expertise that outperform fragmented in-house efforts.
3. Technology-backed outsourcing brings live reporting, faster investigations, and clearer audit trails.
4. Lucinity provides a structured, end-to-end solution that replaces complications with measurable performance and full transparency.

FAQs

1. What does outsourcing AML operations typically involve?
Outsourcing AML operations means a third-party provider manages tasks like transaction monitoring, KYC, and case reviews under a service-level agreement.

2. How does Lucinity approach outsourcing AML operations differently?
Lucinity takes full operational responsibility using Human AI and delivers measurable outcomes through integrated technology, not just staff augmentation.

3. Is outsourcing AML operations cost-effective for mid-sized institutions?
Yes. It enables predictable budgeting by converting variable labour costs into fixed service fees, often reducing total cost by 10% - 20% annually.

4. Can we maintain control and visibility when outsourcing AML operations?
Yes. Lucinity provides unified case management, real-time dashboards, and auditable AI logic, ensuring full oversight and compliance transparency.