Report highlights cost of financial crime compliance in North America

Financial crime compliance costs have increased for 99% of financial institutions in the US and Canada, with the total cost reaching US$61 billion across both countries.

LexisNexis Risk Solutions released the findings of its latest True Cost of Financial Crime Compliance Study – U.S. and Canada study, which was conducted by Forrester Consulting, 

Mid and large-sized financial institutions (holding more than $10 billion in assets) must reduce costs while complying with regulations, with 44% identifying the escalation of financial crime regulations and regulatory expectations as the primary factor driving increases in compliance costs.

Financial institutions of all sizes are concentrating on cost reduction, with 70% giving priority to cutting costs in the next 12 months.

The challenge of keeping up with the complex sanctions environment is intensifying, leading financial institutions to confront a growing screening workload. At 83% of mid and large-sized organizations and 87% of small organizations (holding less than $10 billion in assets), the number of screening alerts has increased.

Key findings from the study:

  • Technology costs are driving increases in expenses for financial institutions, emphasizing the substantial investment required to meet stringent compliance requirements. Specifically, 79% of organizations noticed rises in technology costs related to compliance/know-your-customer (KYC) software in the past 12 months, while technology costs associated with networks, systems and remote work have increased at 75% of businesses.
  • Seventy-eight percent of small financial institutions witnessed higher increases in compliance costs related to labor compared to their mid and large-sized counterparts (63%). Conversely, mid and large-sized financial institutions were more likely to experience higher cost escalations for technology, particularly in compliance with KYC software (82%) and external costs associated with outsourcing (79%).
  • Cryptocurrencies, digital payments and AI technologies are now also emerging as tools for illicit activities. Organizations are grappling with the impact of these sophisticated criminal methodologies within an already complex regulatory landscape. When asked about the types of financial crime they had observed significant increases of more than 20% in the past 12 months, 22% of companies identified financial crime involving cryptocurrencies, while 22% reported heightened use of AI.

“As the cost of financial crime compliance rises for organizations across the U.S. and Canada, organizations must take a strategic approach to financial crime compliance,” said Matt Michaud, Global Head of Financial Crime Compliance at LexisNexis Risk Solutions. “Skilled in-house compliance teams play a crucial role, but businesses should be actively seeking ways to reduce labor costs while simultaneously improving compliance efficiency. Organizations also need to actively counter cybercriminals exploiting artificial intelligence, cryptocurrencies and digital channels. Financial institutions must proactively equip themselves with comprehensive data sets, advanced AI/ML-based compliance models and robust analytics within their financial crime compliance solutions to swiftly identify new crime patterns.”

Photo by Greg Rosenke on Unsplash


Stuart O'Brien

All stories by: Stuart O'Brien