LexisNexis survey outlines true cost of anti-money laundering compliance for financial firms
AML compliance costs rose between 9 and 10 percent during the past two years with growth expected to continue at a similar rate over the coming year.
The report surveyed the views of experts within the financial crimes sector that are responsible for Know Your Customer (KYC) remediation, sanctions monitoring and/or AML transaction monitoring at banks, investment firms, asset management firms and money services bureaus across the Asia Pacific region.
Some of the key findings included that midsize to large financial firms (those with USD10 billion or more AUM) have significantly larger annual average compliance costs than smaller firms, ranging from approximately USD12 million to USD14 million for larger firms and USD1.2 million to USD2.08 million for smaller firms.
High labor costs apparently make up a considerable portion of AML compliance spending. As a result, larger firms are implementing labor-related steps to address the impact of non-bank payment providers and systemic risks, including enhanced training and controlling operations screening hours.
One problematic area is that despite the labor-intensive nature of the AML function within financial firms, the report showed there is limited use of newer technologies across both smaller and larger firms in the region. The study also found that business de-risking is a top driver for AML functions among APAC financial institutions.
Thomas C Brown, senior vice president, US Commercial Markets and Global Market Development at LexisNexis Risk Solutions, said, "As compliance regulations grow in complexity and translate into more alert volumes, it will become increasingly difficult for APAC financial firms to keep pace, manage false positives and avoid non-compliance issues."
Brown did, however, also point out potential positives. "Technology can ease the burden of effectively managing the impact of AML compliance on the business. It's not just about managing direct costs, but also the indirect and opportunity costs that are historically harder to measure, such as those associated with lost prospects and future revenues linked to delays at onboarding."
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