From: RegTech Analyst
While financial crime is a global problem, the US and European market are paying the most to prevent it.
That’s according to LexisNexis Risk Solutions new report. Having surveyed 898 compliance decision-makers around the world, it estimated that the total cost of complying with regulations regarding things like anti-money laundering (AML), know your customer (KYC) and transaction monitoring cost companies $180.9bn.
It looked at the Asia Pacific (APAC) region, Europe, the Middle East and Africa (EMEA), Latin America (Latam) including Mexico, and North America. The report revealed that the projected total cost of financial crime compliance in these markets amounted to $180.9bn per year.
The biggest compliance expense financial firms had to meet their counter-financial crimes obligation was the cost of people, according to the report. Labour represented 57% of the total global compliance cost. The second biggest compliance cost was technology, which swallowed 40% of the cost. The remaining 3% were spent on factors like data privacy limitations and sanctions violations.
Another takeaway from the report was that increasingly complex regulations are causing financial firms in Europe to complete their due diligence, which ramped up the costs in this region. For example, the average time required to onboard a mid-sized corporation has increased from 21 hours in 2017 to 36 hours in 2019.
“As criminals become more sophisticated, a multi-layered solution approach to financial crime compliance is crucial to facilitating a more cost-effective, efficient compliance approach, as well as one that provides benefit to the larger organisation,” said Daniel Wager, vice president, global financial crime compliance strategy for LexisNexis Risk Solutions. “Financial institutions should investigate both the physical and digital identity attributes of their customers, leveraging data analytics to assess risks and behaviours in real time.
“There is now an increased recognition among financial institutions that financial crime compliance initiatives provide broader benefits. Utilising the right technologies as compliance workforces grow allows organisations to decrease the cost of compliance per full-time equivalent (the labour component) and mitigate costs associated with lost business due to increased friction at onboarding. Keeping FTE costs lower is essential to profitability, since labour tends to account for significant increased compliance expenses year-over-year.”
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