Why AML in BPO is a Growing Trend?

The Business Process Outsourcing (BPO) market is experiencing rapid expansion, with its value reaching an estimated $654.78 billion by 2033, with a CAGR of 8.5% during the forecast period (2025-2033), having surpassed $314.55 billion in 2024

That expansion defines today’s conversation around AML in BPO. As financial institutions expand globally, they are increasingly using Business Process Outsourcing (BPO) to manage regulatory tasks. This is especially true for operations related to anti-money laundering (AML). How does the outsourcing model really work? What does this mean for compliance leaders who need to protect institutions from financial crime?

What are BPO Services?

Business Process Outsourcing (BPO) is a company that performs certain delegated tasks on behalf of other companies, such as compliance, customer support, risk management, etc., known as BPO services. These services offer the organizations ample time to perform their core responsibilities. Most of the time, the purpose of adopting BPO services is to improve efficiency and cost optimization.

Scope of AML in BPO Market

As the global BPO market expands, with the Banking Financial Services and Insurance Sector (BFSI) sector alone contributing $125 billion in 2024, financial institutions are increasingly outsourcing AML-related functions such as customer onboarding, screening, transaction monitoring, and regulatory reporting. According to PWC’s survey of 2023, approximately 61% of FIs in a specific region outsourced their compliance functions to BPOs. While outsourcing can enhance efficiency and facilitate scaling, it can also bring some challenges.

Not all BPO providers carry the same responsibilities, and regulatory obligations vary depending on the nature of services.

Which BPOs Require AML/CFT Compliance?

AML Compliance obligations do not directly apply to BPOs; however, AML obligations can extend to certain BPOs depending upon the nature of services offered by them and the extent to which they are involved with the financial services directly or indirectly.

1. BPOs Providing Services to Financial Institutions

These organizations work closely with banks, fintech companies, and other regulated businesses. They provide services like monitoring transactions, checking customer information, and screening for sanctions. Since they handle AML/CFT operations, they must follow strict regulations. They are required to comply with laws such as the Money Laundering Control Act and the USA PATRIOT Act.

2. BPOs Indirectly Supporting Financial Services

These include IT firms, call centers, software developers, and other vendors who may not directly handle compliance but often manage or access customer data or financial systems for regulated institutions. Even though these service providers may not perform direct AML tasks, their role as third-party non-banking services means they can become indirect conduits for financial crime if controls are lacking. As a result, AML and CFT compliance expectations extend to them to mitigate risk exposure.

The prevalence of outsourcing in finance exposes the industry to a massive scale of risk. For instance, the IOSCO report noted that 68% of firms in Ontario (Canada) and 75% in Singapore utilize some form of outsourcing.

Therefore, whether or not directly handling compliance functions, BPOs are expected to carefully ascertain whether any of their services fall under the scope of AML laws of the relevant jurisdictions.

How likely is a BPO to face Anti-Money Laundering Scrutiny?

For BPOs that are not providing AML compliance services, like call centers or IT companies, it’s still necessary to adhere to effective BPO compliance practices. If they manage sensitive financial data like transaction records, bank details, credit card details, etc, they can face scrutiny in case of any involvement with suspicious or illicit activity. Additionally, BPOs offering certain services, such as payroll processing, etc., may be required to undergo some level of due diligence.

There may not be specific AML laws for business process outsourcing (BPO) companies. Still, the situation can be complicated due to their relationship with the principal, who may be subject to AML Laws. Understanding AML rules for BPOs can be difficult because the obligations depend on the services they provide and the types of data they handle. This is why it is vital for BPOs, especially those dealing with financial or sensitive customer information, to understand their legal obligations and regulatory expectations.

Challenges of Outsourcing AML/CFT System in BPO

Outsourcing can be cost-effective and help businesses grow, but outsourcing anti-money laundering (AML) and counter-terrorism financing (CFT) checks adds complexity. It requires careful monitoring to make sure that compliance standards are met. Some of the risks include:

• Loss of control over operations
• Inconsistent quality of case handling across teams.
• Lack of understanding about jurisdiction
• Managing data and privacy rules across borders can be challenging.
• The lead agency is responsible for accountability, not the vendor.

These risks become worse when outsourcing involves different jurisdictions, especially where local AML rules vary or are not well understood.

Advantages in AML for BPO Models

Many institutions still use BPO Anti-money laundering services to enhance their compliance operations, despite the associated risks. Here’s why:

• Addressing Internal Resource Constraints: BPOs offer trained AML professionals to help fill internal staffing gaps.
• Scalability and Agility: Organizations can quickly adjust their operations to meet emerging threats or changes in regulations.
• Specialized Expertise and Technology: BPOs provide access to different jurisdictions and use advanced tools for screening.
• Expense Reduction: Using talent in lower-cost jurisdictions helps minimize operational expenses while ensuring compliance.

To gain the benefits of anti-money laundering measures in business process outsourcing operations, FIs need strong oversight, effective training, and the right technology.

Examples of AML Support in BPO:

Although risk assessment and SAR filing are the least outsourced functions among AML compliance, BPOs usually offer the following services  to the financial institutions:

• Conducting customer due diligence and know your customer procedures
• Handling screening alerts and the escalation process
• Handling the transaction monitoring process
• Conducting investigations and drafting suspicious activity reports
• Providing support in the audit and reporting process

Effective AML Outsourcing Practices

To prevent becoming the next headline for compliance issues, firms must adhere to these AML outsourcing practices:

• Ensure liability by setting up internal oversight for all outsourced AML/CFT functions.
• Set clear Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) that outline quality standards, response times for issues, and compliance with regulations.
• Clearly specify responsibilities to prevent overlapping tasks in compliance.
• Enable centralized visibility via dashboards, audit trails, and monitoring tools.
• Review risks regularly to check third-party controls and follow the rules to align with evolving regulations.
• Keep decision authority in-house for high-risk cases like STR filings or customer offboarding.

Power Your AML in BPO with AML Watcher’s Trusted Data

Outsourcing AML functions to a BPO can cut staffing costs.

If your data infrastructure is not set up properly, it can cause issues with compliance, lead to regulatory issues, and harm your reputation. That’s why every BPO-led AML operation needs more than just staff. It demands a credible data provider that guarantees precise screening, minimizes false positives, and enables real-time decision-making across diverse jurisdictions.

To address the challenges of fragmented compliance oversight and inaccurate data, AML Watcher offers a unified data solution built for high-volume BPO environments.

The solution offers reliable and up-to-date data for BPO teams and their clients. AML Watcher’s platform supports:

• Real-time screening with updates every 15 minutes from officially recognized sources such as OFAC, HM Treasury, UNSC, Interpol, Europol, etc.
• Sentiment-aware adverse media assessment to cut through the noise
• Scalable workflows and customizable thresholds for different risk levels
• Full auditability for oversight, SLA tracking, and regulatory reporting
• Intelligent alert prioritization to minimize fake alerts and operational delays