LexisNexis Study: Financial Institutions Spend Over USD $206B on Global Financial Crime Compliance

LexisNexis® Risk Solutions released its annual True Cost of Financial Crime Compliance Report. The study examines how financial institutions navigate the expenses and challenges tied to evolving financial crime compliance requirements. The findings reflect the perspectives of 1,181 professionals in financial crime compliance from a diverse range of small, medium and large companies across the U.S./Canada, APAC, EMEA and LATAM.

The report offers insight into the worldwide financial cost of compliance, with financial institutions bearing a total cost of USD $206.1 billion. This cost is comparable to more than 12% of global research and development (R&D) expenditure and equates to $3.33 per month for each working-age individual on Earth.

Key findings from the LexisNexis Risk Solutions True Cost of Financial Crime Compliance Report – 2023

Artificial Intelligence (AI) Leaves its Mark
While certain industries are still determining the ways in which AI and machine learning (ML) will bring about an influence, 71% of professionals in financial crime compliance indicate that their organizations are already enhancing data utilization through advanced analytics. Additionally, 72% confirm that they employ analytics and AI to enhance their compliance procedures.

However, similar to historic changes in ways of working, problems with data quality, data silos, outdated legacy systems and a lack of collaboration internally can create avoidable compliance activity and expenditure.

EMEA Remains a High-Cost Centre for Financial Crime Compliance
The study reveals that EMEA financial institutions, and their customers continue to incur a more substantial expense for financial crime compliance compared to other regions. The overall cost of financial crime compliance in EMEA surpasses that of the U.S./Canada by 39.8%. This difference is partly indicative of the escalating intricacy of compliance requirements.

Globally, 78% of organizations specifically 80% in EMEA indicate that the intricate network of regulations and sanctions acts as a constraint on their business operations. In contrast, APAC and LATAM are comparatively more cost-effective regions, despite significant compliance expenditure. The financial compliance expenses in APAC amount to 74.5% of those in the U.S./Canada, while LATAM’s costs are 24.7% in comparison.

Change to Address Future Challenges
CEOs, vice presidents and directors in financial institutions globally are not complacent. Many new initiatives add to the ongoing complexity they face in meeting financial crime compliance requirements. However, 85% of financial institutions place enhancing customer experience at the top of their priority list. This reaffirms a commitment towards fostering trust and delivering satisfaction, even in the face of proliferating financial threats. A substantial emphasis of these efforts revolves around optimizing the efficiency and efficacy of financial crime compliance concerning payments. Globally, 74% of institutions emphasize that this is a critical or high-priority endeavour.

“The financial impact of crime resonates through businesses’ financial statements and consumers’ wallets,” said Leslie Bailey, Vice President, Global Head of Financial Crime Compliance and Payments for  LexisNexis Risk Solutions. “In the pursuit of the common good, legislators and regulators collaborate tirelessly with financial institutions to establish necessary mandates. However, these endeavours aren’t without costs. Our report underscores that financial institutions are making significant investments to stay compliant with financial crime regulations. Effective collaboration within these institutions is pivotal for enhancing the customer experience while managing these costs. Leveraging emerging technologies alongside existing solutions can empower institutions to achieve their objectives and deliver optimal customer outcomes.”