UK firms spending £22k each hour on fighting fraud

UK firms spending £22k each minute on fighting fraud

UK financial services organisations are collectively spending £32.4bn each year on financial crime compliance (FCC), according to a report from LexisNexis Risk Solutions.

In its report, ‘True Cost of Compliance’, it claims this figure is an increase of 19% since 2020. The report also found that most firms expect FCC costs to increase over the next three years by an average of 8%.

The £32.4bn figure is equivalent to around three quarters of the UK’s defence spend, it said.

LexisNexis’s report also states that with over 900 UK firms generating annual revenues of over £5m, the mean annual cost of compliance for a UK financial services firm is £194.6m.

On average, financial services firms are spending £533,150 every day on FCC, which is the equivalent to around £22,000 per hour and £370 each minute.

A big driver at the high costs, according to the report, is the push for greater automation. It stated that technology spend as a share of the total amount spent on FCC increased from 25% in 2020 to 30% in 2022. When combined with technology-related employment and training costs, total technology spend represents 50.9% of all FCC costs.

Technology is being most used through customer due diligence (CDD) processes. The report states that CDD represents 67% of all FCC spend.

LexisNexis Risk Solutions managing director Steve Elliot said, “In one sense, the report makes for encouraging reading. It shows firms are investing hundreds of millions of pounds on transformative technology and training. However, this should be streamlining and improving processes to deliver efficiencies and productivity gains. The rising costs suggest financial services firms aren’t yet seeing these investments payoff.

“One reason for this could be that firms’ overall risk management strategies remain extremely fragmented. Day-to-day processes are siloed, feeding inefficiencies, or failing to make the most out of the capabilities offered by the technology, software, and data sources that organisations are investing in.”

Another report from LexisNexis found that 43% of financial services expect the cost-of-living crisis to increase the risk of financial crime and fraud over the next 12 months.

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