TL;DR:
- LexisNexis released its annual report on financial crime compliance costs.
- Financial institutions worldwide bear a massive burden of USD 206.1 billion for compliance.
- EMEA leads in compliance expenses, surpassing the US and Canada by 39.8%.
- Complex regulations and sanctions hinder business operations for 78% of organizations.
- 85% of organizations prioritize improving the customer experience.
- Collaboration and technology adoption are key to managing costs and enhancing compliance.
Main AI News:
In its latest annual report, LexisNexis Risk Solutions delves into the intricate realm of global financial crime costs. The study, aptly titled the “True Cost of Financial Crime Compliance Report,” scrutinizes how financial institutions grapple with the evolving landscape of compliance expenses. Drawing insights from 1,181 professionals in the field of financial crime compliance, hailing from diverse enterprises spanning small, medium, and large establishments across the US and Canada, APAC, EMEA, and LATAM, the findings shed light on the current state of affairs.
The report unveils a staggering revelation – the collective financial burden of compliance borne by financial institutions worldwide stands at a monumental USD 206.1 billion. This formidable sum mirrors approximately 12% of the total global expenditure on research and development (R&D). Translated into a more relatable context, it amounts to a monthly cost of USD 2.22 for every working-age individual on the planet.
Examining the report’s findings further, LexisNexis underscores that a resounding 71% of financial crime compliance professionals are actively harnessing advanced analytics, artificial intelligence (AI), and machine learning (ML) to bolster their data utilization. Impressively, 72% affirm that these cutting-edge procedures are firmly entrenched within their operational framework. However, much like the ebbs and flows of history, the landscape is rife with challenges such as data quality issues, the persistence of data silos, archaic legacy systems, and a lamentable lack of internal collaboration. These hurdles breed avoidable compliance activities, driving up costs.
Interestingly, when compared to other regions, financial institutions in EMEA and their clientele bear a more substantial financial brunt in terms of compliance costs. The cumulative expenses in EMEA eclipse those in the US and Canada by a staggering 39.8%. This disparity is a reflection of the escalating intricacies surrounding compliance requirements.
On a global scale, a resounding 78% of organizations, with a striking 80% in EMEA, voice their concern over the intricate labyrinth of regulations and sanctions that constrict their business operations. APAC and LATAM emerge as comparatively cost-effective regions, despite substantial compliance outlays. In the former, expenses reach 74.5% of those in the US and Canada, while the latter’s costs hover at 24.7% in comparison.
LexisNexis’ comprehensive analysis highlights that these additional initiatives exert a profound influence on the existing complexity faced by financial institutions in meeting compliance requirements. Remarkably, a resounding 85% of organizations prioritize enhancing the customer experience, reaffirming their steadfast commitment to nurturing trust and delivering satisfaction to their valued clients. A significant facet of these endeavors revolves around optimizing the efficiency and efficacy of financial crime compliance, particularly concerning payments. Globally, 74% of institutions unequivocally state that this is a critical or high-priority undertaking.
Officials from LexisNexis emphasize that the financial ramifications of crime reverberate through both businesses’ financial statements and consumers’ wallets. Legislators and regulators collaborate closely with financial institutions to establish imperative mandates, and the report underscores the substantial investments made by these institutions to remain compliant with regulations. Furthermore, LexisNexis underscores the pivotal role of effective collaboration between institutions in enhancing the customer experience while managing costs. Leveraging emerging technologies in conjunction with existing solutions, institutions may be poised to attain their objectives and deliver optimal customer outcomes in this ever-evolving landscape of financial compliance.
Conclusion:
The report underscores the significant financial burden of compliance on global financial institutions, signaling a growing need for efficient data utilization and collaboration. EMEA’s heightened costs highlight the complexity of compliance, while the emphasis on enhancing customer experience suggests a shift towards customer-centric strategies. To thrive in this evolving landscape, institutions must leverage emerging technologies and prioritize collaboration to achieve compliance and customer satisfaction simultaneously.
