ATLANTA, Oct. 21, 2020 /PRNewswire/ -- LexisNexis®
Risk Solutions released the results of its 2020 True Cost of
Financial Crime Compliance Study – U.S. and Canada Edition. The
survey of compliance professionals identifies the drivers and
influencers affecting financial crime compliance and highlights
spending trends. This year, the study also explores the range of
challenges that financial institutions (FIs) have experienced
during the COVID-19 pandemic.
The survey finds that the cost of financial crime compliance has
risen sharply since 2019, up to a projected $42 billion across U.S. and Canadian financial
firms this year. This is a sizeable 33% jump from 2019, when the
total projected cost was $31.5
billion. The study projects cost in 2020 to be $35.2 billion in the U.S. alone, with Canadian
FIs contributing $6.8 billion.
COVID-19 Impact
Compliance departments at both large
and small FIs have experienced a wide variety of difficulties
during the pandemic and resultant remote working period. Financial
crime compliance professionals in the U.S. attribute an average of
23% of financial crime compliance cost increases to the COVID-19
impact. This stems partially from the implementation of the
Paycheck Protection Program (PPP) and increased manual labor costs
for FIs to detect lending-related financial crimes such as money
laundering. Survey respondents anticipate that the ongoing
pandemic-related pressures facing compliance departments will also
drive increased compliance costs in the future.
Operational challenges arising from COVID-19 protocols and
subsequent remote working requirements have also negatively
impacted the effectiveness and efficiency of key compliance
activities. The figures below represent respondents who reported a
moderate to significant negative impact on these key financial
crime compliance processes.
- 91% reported a negative impact on customer risk profiling
- 83% reported a negative impact on sanctions screening
- 78% reported a negative impact on KYC for account
onboarding
- 74% reported a negative impact on efficient resolution of
alerts
- 61% reported a negative impact on positive identification of
sanctioned entities or politically exposed persons (PEPs)
Technology Lowers Costs
Despite the challenges and
costs facing compliance departments, FIs who invested in technology
solutions to support financial crime compliance have experienced
lower cost increases and fewer negative impacts from COVID-19.
Year-over-year compliance cost increases are lower among those
allocating more spend to technology and these FIs also realize
greater efficiencies. Larger FIs (over $10 billion in assets) in the U.S. and
Canada who allocated at least 50%
of their compliance costs to technology will spend $5 million less on average in annual costs in
2020 than FIs who allocated 35% or less of those costs to
technology.
"Given the events of 2020, it is no surprise that compliance
industry professionals felt a sizable change in compliance
operations," said Leslie Bailey,
senior director of financial crime compliance strategy for
LexisNexis Risk Solutions. "A multi-faceted approach that includes
efficient technology, intuitive analytics and extensive global risk
intelligence can help financial institutions optimize their
resources and navigate these changes without compromising the
customer experience."
FIs that have invested in compliance solutions will be better
prepared to deal with the new normal and any further sudden
changes. As the cost of doing business rises in the COVID-19
environment, the added cost of compliance may become a
negative tipping point, with businesses experiencing diminishing
returns as companies add more labor resources.
Methodology
The study surveyed 150 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 and anti-money laundering (AML) transaction monitoring.
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 FIs 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 2020 True Cost of Financial Crime
Compliance Study – United States
and Canada Edition. For a discussion of the study's key findings,
Association of Certified Anti-Money Laundering Specialists (ACAMS)
members may register for a webinar featuring Daniel Wager, vice president, global financial
crime compliance strategy for LexisNexis Risk Solutions on
Friday, October 23, 2020 at
1:00 pm ET.
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 across industries. For more
information, please visit
www.risk.lexisnexis.com and www.relx.com.
Media Contacts:
Marcy
Theobald
LexisNexis® Risk
Solutions
678.694.6681
marcy.theobald@lexisnexisrisk.com
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