The research, which surveyed 224 banks from 55 countries, found that banks in North America saw the biggest increase in compliance spending over the last three years, at 71%. They were followed closely by banks in the Middle East and Africa, where spending rose by 70%. Compliance costs rose 58% in Europe, 37% in Asia Pacific, 59% in Central and South America and 60% in Russia.

KPMG says the research found that AML compliance costs have risen by more than banks had predicted in a 2004 study, when respondents on average predicted an increase of 43%. The latest research found that overall banks expect compliance spending to rise by 34% over the next three years to 2010.

The biggest spending by banks across the world continues to be on transaction monitoring systems and staff training costs.

But despite the increased spending banks are still struggling to combat the threat of money laundering. The report found that less than a quarter of banks with an international presence are capable of monitoring a single customer's transactions and account status across multiple countries. KPMG says there is no evidence that larger banks are any more capable in this respect than smaller banks.

Furthermore, despite the availability of sophisticated monitoring technology, a massive 97% of banks say that they are dependent on the "vigilance of staff" to detect suspicious activity.

Karen Briggs, global head of anti-money laundering at KPMG Forensic, says banks are making increased efforts to tackle the money laundering threat but many are struggling to design and implement an effective AML strategy.

"Significant numbers say that the regulatory environment is not helping them as well as it should do - this is clearly a matter of concern, as effective coordination between parties is one of the keys to defeating money launderers," says Briggs.

KPMG says there is significant concern amongst banks that governmental and international regulation needs to be more effectively targeted. Half of respondents believe that while the overall regulatory burden is acceptable, the requirements need to be better focused, while nearly eight per cent of banks believe that regulation should actually be increased in order to combat money laundering more effectively.