RegTech firm LexisNexis Risk Solutions has unveiled its annual True Cost of Financial Crime Compliance Report.
The research showcases how financial institutions are grappling with the expenses and challenges stemming from ever-changing financial crime mandates.
The data derives from 1,181 financial crime compliance professionals spanning various company sizes and regions such as the U.S./Canada, APAC, EMEA, and LATAM. The findings are stark: financial institutions are shouldering a global compliance cost of $206.1bn. This amount parallels more than 12% of worldwide research and development (R&D) spending and translates to a monthly cost of $3.33 for every working-age individual globally.
Notable revelations from the 2023 LexisNexis Risk Solutions True Cost of Financial Crime Compliance Report include:
AI’s Growing Influence: AI and machine learning are revolutionising industries. Specifically, in financial crime compliance, 71% of professionals report that their firms are amplifying data use via cutting-edge analytics. Furthermore, 72% use AI and analytics to bolster their compliance methods. Yet, challenges like outdated systems, data silos, and internal collaboration roadblocks can inflate compliance tasks and costs.
EMEA’s High Compliance Price Tag: The study paints EMEA as the priciest region for financial crime compliance, surpassing the U.S./Canada by nearly 40%. This discrepancy stems from the increasing complexity of compliance protocols in the region. Globally, regulatory networks and sanctions hamper 78% of companies’ operations. In EMEA, this figure jumps to 80%. Conversely, APAC and LATAM present more budget-friendly alternatives, though they also have considerable compliance expenditures.
Adapting to Future Challenges: Top executives in financial institutions worldwide recognise the evolving landscape of financial crime compliance. A dominant 85% prioritise enhancing customer experiences. They aim to optimise the efficiency of financial crime compliance, especially regarding payments, with 74% seeing it as crucial.
LexisNexis Risk Solutions senior vice president Grayson Clarke said, “The financial impact of crime resonates through businesses’ financial statements and consumers’ wallets. In the pursuit of the common good, legislators and regulators collaborate tirelessly with financial institutions to establish necessary mandates. However, these endeavors aren’t without costs.
“Our report underscores that financial institutions are making significant investments to stay compliant with financial crime regulations. Effective collaboration within these institutions is pivotal for enhancing the customer experience while managing these costs. Leveraging emerging technologies alongside existing solutions can empower institutions to achieve their objectives and deliver optimal customer outcomes.”
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