LexisNexis Risk Solutions releases new study on global financial crime costs

In its annual True Cost of Financial Crime Compliance Report, LexisNexis examined how financial institutions navigate the expenses and issues bound to the evolving financial crime compliance requirements. The results indicate the opinions of 1,181 professionals in financial crime compliance from a range of small, medium, and large enterprises across the US and Canada, APAC, EMEA, and LATAM.

Moreover, the report provides insight into the global financial cost of compliance, with financial institutions managing a total cost of USD 206.1 billion. The expense is comparable to approximately 12% of global research and development (R&D) expenditure and corresponds to USD 2.22 per month for each working-age individual in the world. 

LexisNexis found that 71% of professionals in financial crime compliance indicate that their institutions are currently enhancing data utilisation through advanced analytics, with artificial intelligence (AI) and machine learning (ML), while 72% confirm that they employ these procedures. On the other hand, similar to historic changes in ways of working, issues with data quality, data silos, outdated legacy systems, and a lack of collaboration internally can create avoidable compliance activity and expenditure.

Compared to other regions, EMEA financial institutions and their clients continue to experience a more considerable expense for financial crime compliance. The cumulative cost in EMEA surpassed that of the US and Canada by 39.8%, the difference partly indicative of the escalating intricacy of compliance requirements.

Worldwide, 78% of organisations, specifically 80% in EMEA, indicate that the elaborate network of regulations and sanctions constrain their business operations. APAC and LATAM are more cost-effective regions, despite significant compliance expenditure, with expenses in the former reaching 74.5% of those in the US and Canada, while the latter’s costs amount to 24.7% in comparison.

The additional initiatives influence the current complexity financial institutions face in meeting compliance requirements. However, 85% of organisations place enhancing customer experience as a top priority on their list of activities, reaffirming their commitment to fostering trust and delivering satisfaction to their clients. A significant emphasis of these efforts revolves around optimising the efficiency and efficacy of financial crime compliance regarding payments. Worldwide, 74% of institutions highlight that this is a critical or high-priority endeavour.

Officials from LexisNexis stated that the financial impact of crime resonates through businesses’ financial statements and consumers’ wallets. Legislators and regulators collaborate with financial institutions to establish necessary mandates and the report shows that they make substantial investments to stay compliant with regulations. Moreover, LexisNexis said that effective collaboration between institutions has a pivotal role in enhancing the customer experience while managing costs. By leveraging emerging technologies with existing solutions, institutions may be able to achieve their objectives and deliver optimal customer outcomes.

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