The US brokerage industry will spend up to $700m (£441m) by 2005 on technology and outsourcing services to comply with the anti-terrorism and anti-money-laundering regulations of the USA Patriot Act, a report has estimated.
Brokerages spent $117m on Patriot Act compliance measures last year and will invest about $404m this year, when most of the Patriot Act's provisions become law, the report by research and advisory firm TowerGroup found.
The report also indicated that some large brokerages expected to spend up to $30m each on technology to meet new regulations.
The Patriot Act, which was signed by President George Bush in October 2001 in response to the 11 September terrorist attacks, requires financial services companies to develop improved capabilities to identify customers and flag suspicious transactions.
In the UK financial firms are also under pressure from regulators to use technology to bolster anti-money laundering controls.
Last year the Royal Bank of Scotland was fined £750,000 by the Financial Services Authority for breaching money laundering safeguards.
According to TowerGroup, about 39% of US brokerages' compliance budgets are being spent on integrating back-end systems, with 35% going toward new software. Another 24% of the money is being used to upgrade IT infrastructures.