Excerpt from BQprime Article – Published on Oct 05, 2023
According to the True Cost of Financial Crime Compliance Report from LexisNexis Risk Solutions, financial institutions all over the world are struggling with rising financial crime compliance costs, which have reached a staggering $206.1 billion. In the past 12 months, 98% of these institutions witnessed a surge in compliance expenditures, representing over 12% of global research and development spending. On an individual level, this translates to $3.33 per month for each working-age person globally.
The digital banking shift has significantly increased exposure to financial crimes, with 59% reporting a surge in digital payment-related offenses, 58% in cryptocurrencies, and 56% in AI technologies, according to the survey of 1,181 financial crime compliance professionals. Key cost drivers include heightened financial crime regulations (38%) and regulatory expectations.
AI and machine learning are already leaving a substantial mark, with 71% of professionals enhancing data utilization through advanced analytics. However, challenges like data quality, silos, legacy systems, and internal collaboration hurdles can inflate compliance activities and costs.
In terms of regional breakdown, EMEA (Europe, the Middle East, and Africa) surpasses others in financial crime compliance expenses, outpacing the U.S. and Canada by 39.8%. APAC and LATAM, in contrast, are relatively more cost-effective. EMEA’s total cost is $85 billion; the U.S./Canada stands at $61 billion; APAC at $45 billion; and LATAM at $15 billion.
Despite the complexity, 85% of financial institutions prioritize enhancing the customer experience amid numerous initiatives. Governance (83%), regulatory compliance (82%), operational resilience (80%), and cost optimization (80%) are also focal points for these institutions in ensuring stability, transparency, and ethical conduct. Grayson Clarke, Senior Vice President at LexisNexis Risk Solutions, emphasizes the need for effective collaboration within institutions to manage costs while enhancing the customer experience through leveraging emerging technologies alongside existing solutions.
To delve deeper into this topic, please read the full article on BQprime.