Nearly nine-in-10 (87%) limited partners (LPs) have declined or reconsidered a fund allocation due to anti-money laundering and Know Your Customer (AML/KYC) concerns, underscoring just how significant compliance has become as a gatekeeping item for fundraising.
According to a new study by CSC, a provider of global business administration and compliance solutions, general partners (GPs) are already feeling the strain. Almost two-thirds (63%) report losing investors or reinvestments due to AML/KYC shortcomings, most commonly from documentation gaps (61%) and onboarding delays (24%).
CSC surveyed 200 GPs and 200 LPs across North America, Europe, the U.K., and Asia Pacific to capture views on the evolving compliance landscape.1 The findings are detailed in CSC’s report, “Beyond Compliance: How AML/KYC is Redefining Investor Confidence.”
The study found that LPs are setting the pace when it comes to AML/KYC. 88% said they’re more likely to invest in a manager with a formal AML/KYC program, even before regulations mandate it.
Top operational due diligence risks cited by LPs include inconsistent practices across jurisdictions (82%), lack of independent oversight (48%), and reliance on manual or paper-based compliance (41%). Nearly all LPs (97%) expect AML/KYC to become a critical, central element of due diligence within three years.
“AML has evolved from a back-office compliance task to a front-line determinant of fundraising success,” says Chalene Francis, senior executive director and head of Fund Services, North America at CSC. “LPs have options, and they’re backing managers who treat compliance as non-negotiable. Managers must prepare early and work closely with service providers to avoid the friction points that slow onboarding. If you wait until fundraising is already underway to get AML-ready, you risk losing both investors and reinvestments.”
With significant AML and KYC regulatory changes underway globally, many GPs acknowledge they’re not fully prepared. Globally, fewer than half (47%) of managers feel ready for new AML/KYC rules and developments taking effect from 2026 onward, for instance, including the launch of the EU’s Anti-Money Laundering Authority that will assume direct supervisory powers over high-risk financial entities.
To close the gap, fund managers are leaning on outsourcing and technology. More than nine in 10 (91%) already outsource some or all AML/KYC functions, with nearly three-quarters reporting cost savings of between 10-30%. Over the next year, 83% of GPs plan to expand outsourcing while 59% expect to increase technology investments.
