Anti-money laundering compliance is costing US financial services organisations $25.3bn per year, according to a new report.
LexisNexis Risk Solutions’ inaugural 2018 True Cost of AML Compliance report for the United States surveyed more than 150 decision-makers at banks, investment, asset management and insurance firms.
With the cost of AML Compliance reaching $25.3bn, the report shows that smaller firms are hit hardest, relative to their bottom lines. The cost of AML compliance reaches up to 0.83 as a percent their total of assets, compared to larger firms, which see costs up to .08 percent of total assets.
According to these costs are driven by the fact that certain overhead investment requirements exist when implementing an AML program, regardless of scale.
Daniel Wager, vice president, global financial crime compliance, LexisNexis Risk Solutions, comments, “As compliance costs rise, mid- to large-sized firms are using a wider array of newer technologies and data sources to prevent financial crime. While these firms report a higher average compliance spend per year ($18.9M), they are actually lowering the cost of compliance. The overarching goal is to achieve compliance with greater efficiency and with less human capital.”
Those surveyed said regulatory reporting, customer risk profiling and sanctions screening are among the key challenges for U.S. financial firms. It also found that operational inefficiencies pose challenges to those firms that use less technology.
The findings also show that implementing a layered approach to AML compliance technology may not only be necessary, but also crucial to improving AML compliance processes.
Firms that use a layered solutions approach, using multiple services like cloud-based KYC procedures, shared interbank databases and machine learning/AI, take significantly less time to complete due diligence than those using just one of these alone.
The $25.3 billion figure is based on responses from small (under $10bn in total assets = $12.3bn in cost) and mid to large (over $10bn in total assets = $13bn in costs) sized firms. LexisNexis Risk Solutions conducted past True Cost of AML Compliance studies in Asia, Europe and South Africa, and this is the first to examine the United States cost of compliance.
LexisNexis Risk Solutions recently partnered with iMeta Technologies in a bid to reduce financial crime risk for financial institutions. The company said it will integrate iMeta’s Client Lifecycle Management (CLM) technology with its data capabilities. Together, this will increase efficiencies for customers and offer a more robust, all-encompassing bank compliance program.
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