Now that we’re well into 2025, it’s clear what the biggest trends are in Know Your Customer (KYC), Customer Due Diligence (CDD) and Third-Party Risk Management (TPRM).

Here are the top three trends I think are already shaping the industry this year:

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1.  The rise of AI-driven financial crime prevention tech

Artificial Intelligence (AI), Machine Learning (ML), blockchain and big data analytics are becoming essential tools for identifying suspicious activities and ensuring compliance with anti-money laundering (AML) regulations. RegTech and FinTech companies are rapidly integrating these technologies into their solutions - including us at Avallone, where we take a pragmatic approach to AI adoption, ensuring the right questions are asked to maximize AI’s benefits in KYC workflows.

AI and ML continue to demonstrate game-changing capabilities in KYC, CDD, and TPRM. These technologies can automate anomaly detection, flag potential threats with greater accuracy and process massive amounts of data at lightning speed. They can generate comprehensive reports in real-time, dramatically reducing the workload for human analysts. What once took days or weeks can now be done in seconds, making AI-driven compliance solutions not just a convenience but a necessity for businesses managing regulatory risk.

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2. Moving towards pKYC (Perpetual KYC)

Perpetual KYC - commonly denoted as pKYC - is an emerging KYC trend shifting compliance from static, periodic reviews to continuous, real-time customer monitoring. 

It uses KYC automation to move from periodic manual reviews to ongoing, real-time customer reviews. 

A real game changer, this pKYC approach allows businesses to update customer information daily - or even hourly - while enabling dynamic reverification. If any suspicious activity is detected, businesses can instantly trigger additional verification steps, ensuring a proactive, rather than reactive, approach based on up-to-the-minute insights into potential risks

Compare this to traditional KYC policies which have much longer time intervals when it comes to conducting customer evaluations - that are commonly based on risk level. This means that high-risk clients are usually reviewed each year, while medium- and low-risk clients are reviewed every three to five years, respectively. However, this static approach does not account for the rapidly changing geopolitical and regulatory landscape of 2025. With increasing scrutiny from regulators, businesses are recognizing the advantages of real-time compliance monitoring to reduce exposure to financial crime and regulatory penalties.

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3. Risk Management - and No Longer Just for Regulated Industries

For years, Know Your Customer (KYC) was seen as concerns primarily for regulated industries like banking and financial services. These businesses needed to stay ahead of evolving compliance requirements from regulatory authorities, but today, even non-regulated companies are taking notice.

Overall, regulatory compliance continues to be a key KYC trend, as the framework is constantly evolving. So of course, it makes sense that regulated industries need to stay informed of regulatory changes. But even though KYC typically applies to regulated industries, non-regulated sectors are not only ensuring that they are also informed, but they are proactively mitigating risks - especially since many regulatory changes address potential threats or challenges that may have a broader impact.

A rising number of companies that aren’t legally required to conduct KYC or due diligence are seeing the advantages of proactive risk mitigation strategies. As supply chains grow more complex and financial crime risks increase, businesses across industries are recognizing that strong due diligence is critical for protecting their operations, reputation, and financial health.

The shift is being driven by a simple realization: risk management isn’t just about compliance... It’s about resilience. Companies that wait until they are forced to adopt risk management strategies often find themselves playing catch-up after damage has already been done. Instead, forward-thinking businesses are choosing to get ahead of potential threats, ensuring they are better prepared for regulatory changes, economic volatility and emerging financial crime risks.

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Key Takeaways

The landscape of KYC, CDD and TPRM is rapidly evolving, and businesses must adapt to stay competitive and compliant.

• AI is transforming financial crime prevention, making compliance processes faster, smarter and more effective.
• Perpetual KYC (pKYC) is replacing longer periodic reviews, allowing real-time customer monitoring and proactive risk management.
• Risk management is no longer just a regulatory requirement and non-regulated companies are adopting best practices to protect their operations and reputation.

As risk and compliance challenges grow, I feel that businesses (such as our many customers!) that embrace AI-driven automation and continuous monitoring will be best positioned to stay ahead of regulatory changes, mitigate risks, and gain a competitive edge.