Global financial institutions are grappling with soaring financial crime compliance expenses, amounting to $206.1 billion, with 98% of these institutions witnessing a rise in costs over the past year, according to LexisNexis Risk Solutions’ True Cost of Financial Crime Compliance Report. This expense equates to over 12% of worldwide research and development spending, or approximately $3.33 per month per working-age individual globally.
The report highlights that the evolving technological and economic landscape has transformed the compliance landscape for financial institutions. The shift to digital banking has increased the risk of financial crimes, with more than half of respondents reporting a significant surge in financial crimes related to digital payments (59%), cryptocurrencies (58%), and AI technologies (56%).
The primary drivers of rising compliance costs are increasingly stringent financial crime regulations and regulatory expectations, as indicated by 38% of institutions.
The report’s insights are drawn from 1,181 professionals in financial crime compliance across regions such as the U.S./Canada, Asia-Pacific, Europe, the Middle East and Africa, and Latin America.
Notably, 71% of financial crime compliance professionals are already leveraging advanced analytics and AI to enhance data utilization. However, issues like data quality, data silos, outdated legacy systems, and internal collaboration challenges can hinder compliance efforts and inflate costs.
The report reveals that the EMEA region continues to bear the highest financial crime compliance expenses globally, surpassing the U.S. and Canada by 39.8%. In contrast, APAC and LATAM are relatively more cost-effective regions.
Despite the complexities, 85% of financial institutions prioritize improving customer experience as a key initiative. They also focus on optimizing compliance efficiency concerning payments, strengthening governance, meeting regulatory requirements, and enhancing operational resilience.
Overall, financial institutions are investing significantly in compliance, and collaboration within these institutions is crucial for managing costs and enhancing the customer experience. Leveraging emerging technologies alongside existing solutions can help institutions achieve their objectives and deliver optimal customer outcomes.
To read full report, click here.
By FCCT Editorial Team
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