Compliance Professionals Can Find Practical Guidance in Global Risk Report Published by LexisNexis


In March LexisNexis Risk Solutions published a report titled, The True Cost of Financial Crime Compliance. Based on a global study, the report provides valuable insight into the current and trending state of compliance. At a time when organizations are under increased pressure to cut compliance-related costs, the report also offers financial crime compliance professionals with useful information that can be turned into practical solutions.


Report Overview and Background

The global report is based on a comprehensive study which surveyed 898 financial crime compliance decision makers across four regions, including APAC, LATAM, EMEA, and North America, as well as specific markets within those regions. The decision makers were comprised of compliance professionals with oversight of various sanctions and anti-money laundering (AML) monitoring activities within small, medium, and large financial institutions, including banks, investment firms, asset management firms, and insurance firms.


Report Summary - Regional Observations

Although all markets included in the study had risks and challenges related to financial crimes compliance, some regions and countries had more than others. Three key high-level regional observations were noted. These observations are:


  1. The largest regional markets for financial crime compliance are located in Europe and the U.S.

  2. At a regional level, Europe and LATAM experience the most challenges with financial crime.

  3. There are specific countries outside of Europe and the LATAM regions which also experience heightened challenges more so than others. These include Singapore, Indonesia, and Canada. And within North America, Canada was cited as “one of the world’s major money-laundering jurisdictions.”


Report Summary - Key Findings

Six notable findings were highlighted in the report, as follows:


  1. The projected total cost of financial crime compliance across all financial institutions in the key markets of APAC, EMEA, LATAM, and North America is $180.9B. The majority of this is represented by the UK and Germany, followed by the United States, France, and Italy.

  2. Average annual financial crime compliance costs are highest for mid/large UK and European financial institutions. The average cost of financial crime compliance is significantly higher for mid/large financial institutions in the UK, Germany, France, Italy, and the Netherlands compared to those in other global markets.

  3. Each global region has its own unique risks and challenges with money laundering and financial crime compliance.

  4. Non-bank payment providers create additional compliance headaches and risks for financial firms across regions, particularly in LATAM and Canada.

  5. These challenges and issues are having a negative impact on financial institutions, particularly in EMEA, LATAM, and the U.S.

  6. A layered approach to financial crime compliance technology is crucial to facilitating a more cost-effective, efficient compliance approach, as well as one that provides benefit to the larger organization.


The Benefits of Compliance and a Multi-Layered Solution

Perhaps the most practical solutions can be gleaned from the report's sixth and final finding regarding the benefits of a layered approach to financial crime compliance technology and the resulting efficiency and cost benefits of such an approach. As noted in the report, "financial crime compliance investments can benefit other functional units where the organization has a fuller understanding of customer risks and preferences." The report further noted that "there can be a direct cost benefit when layering financial crime compliance technology."


In this regard, the global study noted the following four benefits:


  1. There is recognition that financial crime compliance initiatives can provide broader benefits to the business.

  2. A multi-layered solution approach to financial crime compliance and identity proofing is essential as criminals become more sophisticated, thus requiring a sophisticated approach to fighting them.

  3. Study findings show that financial institutions which use a more layered solutions approach are completing due diligence much faster than other institutions without such an approach.

  4. Utilizing proper compliance technologies can reduce compliance labor costs.


Conclusion

The True Cost of Financial Crime Compliance Report offers an overview of the current financial crime compliance environment and outlines six key findings of a global study on which the report is based. Financial crime compliance professionals would be well advised to pay particular attention to these findings as they offer guidance on how to effectively manage evolving financial crime compliance requirements.


To be directed to the LexisNexis Risk Solutions website where you can download the full report, click here.


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