ATLANTA, Sept. 27, 2021 /PRNewswire/ -- LexisNexis®
Risk Solutions revealed the results of its annual True Cost of
Financial Crime Compliance Study for the U.S. and Canada. The total projected cost of financial
crime compliance for the region in 2021 is approximately
$49.9 billion, up 19% from 2020 and
up 58% compared to 2019. The new edition of the survey illustrates
the sharp increase in financial crime compliance costs, compared
with both the pre- and early pandemic timeframes. This rise is
attributed in part to labor costs, increasing regulations and
evolving criminal threats.
The study projects the average annual cost of financial crime
compliance for U.S. financial institutions with $10 billion or more in assets to be $27.8 million for 2021, up 36% from last year and
95% since 2019, nearly doubling since the last study examining
pre-pandemic times. Financial institutions of this size in
Canada see a spend of $22.9 million, up 17% from last year and 64%
since 2019.
Pandemic Continues to Spur Growth
The pandemic
continues to negatively impact compliance operations and the impact
has significantly increased since the early stages of the
pandemic.
- Sixty eight percent of U.S. respondents report longer times
required to complete due diligence for new account onboarding due
to the pandemic compared to 37% in 2020
- Fifty five percent of U.S. respondents report reduced
productivity compared to 22% in 2020
Key Risk Sectors
More U.S. financial institutions now
rank real estate and hospitality as top money laundering risk
segments along with ecommerce. Real estate is favored by criminals
who use shell companies to launder money through these types of
transactions. Additionally, crime involving digital payments,
trade-based money laundering and money mule schemes are on the rise
with 83% of large U.S. financial institutions reporting an increase
in exposure to crime involving digital payments.
Digital currency is a growing problem for Canadian firms with
75% reporting an increase in crime involving cryptocurrency. Crimes
involving digital payments have the greatest impact on compliance
costs for U.S. financial institutions whereas crimes involving
cryptocurrency have the greatest impact on compliance costs for
Canadian firms.
Operational Issues
The survey results demonstrate that
financial institutions are battling a broader set of issues, with
challenges reported across multiple areas including resource
efficiencies and customer risk profiling. Higher labor costs were
fueled by increased workload from growing compliance requirements
with 74% of U.S. firms and 88% of Canadian firms listing expanding
regulations as a primary driver for adding compliance staff. Survey
respondents indicate that a lack of current and extensive data tops
the list of Know Your Customer (KYC) due diligence challenges
facing financial institutions, with lack of data about a business,
complexity and broadness of business data and lack of up-to-date
business information being cited most often by survey
respondents.
"The study shows clear linkages between the pandemic, digital
crime and increasing regulations. As a result, financial
institutions need to prepare for expanded compliance obligations
and risks from emerging financial crime," said Leslie Bailey, vice president of financial crime
compliance strategy for LexisNexis Risk Solutions.
Continued Bailey, "Digital transformation is a game-changer for
financial crime compliance operations and will require a
sophisticated approach that incorporates insight into digital
behaviors and richer data to effectively mitigate risk and ensure
compliance amidst growing regulatory pressures and evolving
threats."
Methodology
The study surveyed 145 decision-makers in
the U.S. and Canada who oversee
financial crime compliance processes at their companies, including
but not limited to sanctions monitoring, Know Your Customer (KYC)
remediation, financial crime transaction monitoring and/or
compliance operations. Responses were collected in June 2019, August
2020 and June 2021.
Organizations included banks, investment firms, asset management
firms and insurance firms. The total annual cost of compliance
across firms was calculated using survey data on financial crime
costs, as a percent of total assets and secondary data that
provides the total assets for all financial institutions in the
U.S. and Canada. The spend amount
was generated by multiplying the average percent allocated to
financial crime costs by the reported total asset amount.
Download a copy of the True Cost of Financial Crime Compliance
Study for the U.S. and Canada.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced
analytics to provide insights that help businesses and governmental
entities reduce risk and improve decisions to benefit people around
the globe. We provide data and technology solutions for a wide
range of industries including insurance, financial services,
healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout
the world and are part of RELX (LSE: REL/NYSE: RELX), a global
provider of information-based analytics and decision tools for
professional and business customers. For more information, please
visit www.risk.lexisnexis.com and www.relx.com.
Media Contact:
Marcy
Theobald
678.694.6681
marcy.theobald@lexisnexisrisk.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/lexisnexis-risk-solutions-study-reveals-sharp-rise-of-financial-crime-compliance-costs-now-nearly-49-9-billion-per-year-for-financial-institutions-in-the-united-states-and-canada-301383351.html
SOURCE LexisNexis Risk Solutions