LexisNexis Risk Solutions Report Reveals the Yearly Cost of Financial Crime Compliance Reaching $56.7 Billion, a 13.6% Increase for Financial Institutions in the United States and Canada Combined

Latest True Cost of Financial Crime Compliance Report Finds Larger Financial Firm Costs Continue to Rise Sharply, with an Increasing Gap Between U.S. and Canadian Institutions

ATLANTA, Sept. 29, 2022 /PRNewswire/ -- LexisNexis® Risk Solutions released the results of its 2022 True Cost of Financial Crime Compliance Study – U.S. and Canada Report. The annual True Cost of Financial Crime Compliance Study compiles responses of compliance professionals to identify the drivers and influencers affecting financial crime compliance and highlights spending trends. The study found that the cost of financial crime compliance has continued its rise over pre-pandemic levels, up 13.6% since 2021, to approximately U.S. $56.7 billion in the U.S. and Canada combined.

A significant majority of U.S. (73%) and Canadian (86%) financial institutions reported an increase in financial crime compliance costs in a 12-month period beginning in April or May 2021. The average annual cost of financial crime compliance per organization has increased most among mid/large U.S. financial institutions, up to 14%. While the percentage increase is down from the 36% spike between 2020 and 2021, the cost among larger U.S. firms is 121% higher than before the pandemic and 71% higher among larger Canadian firms for this same period.

Key Findings from the Report:

• The cost of financial crime compliance has continued to increase although the rate of increase may be leveling off. However, larger U.S. financial firms' costs continue to rise sharply based on regulatory impacts, increased financial crime exposure and labor, although survey respondents indicated an upswing in technology investment compared to prior years.
• Key compliance operations challenges include regulatory reporting, customer risk profiling and digital identity verification. U.S. firms are spending resources on politically exposed person identification and sanctions screening. Respondents indicate a need for more digital identity attribute data and analysis.
• Financial institutions that use third-party portals/compliance solutions for primary KYC due diligence can experience a single risk view, a lower cost of compliance and greater effectiveness at identifying ultimate beneficial owners and potential criminal relationships.
• The Anti-Money Laundering Act of 2020 (AMLA) has particularly impacted large U.S. financial institutions and their compliance costs. AMLA broadens the scope of law enforcement and reporting requirements for AML due diligence and is an overhaul of the Bank Secrecy Act and anti-money laundering regime.
• Increased geopolitical risks have also had an impact as well as significant sanctions against Russia, including a comprehensive territorial trade ban, targeted blocking sanctions against specific individuals, entities, financial institutions and Nord Stream 2 and trade and export restrictions.

"Costs are high for financial firms because they are facing challenges by an even broader set of financial crimes, including crimes related to money mules, cryptocurrency, ransomware, digital transactions and supply chain corruption," said Leslie Bailey, vice president, financial crime compliance, LexisNexis Risk Solutions. "The combination of these challenges is impacting productivity, due diligence and new customer acquisition. Financial institutions should have a more holistic, robust sanctions screening system and resources to adjust to increased geopolitical risks, the increasing level of digital transactions and the risk of an economic recession. Technology and data are a big part of the solution."

The study surveyed 150 decision-makers in the U.S. (121) and Canada (29) who oversee KYC remediation, sanctions monitoring, financial crime transaction monitoring and/or compliance operations. Organizations included banks, investment firms, asset management firms and insurance firms. Respondents were requested to consider the time period of May 2021 through May 2022 in their responses.

Download a copy of the 2022 True Cost of Financial Crime Compliance Study – United States and Canada Edition.

About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

Media Contacts:
Marcy Theobald
LexisNexis® Risk Solutions
678.694.6681
marcy.theobald@lexisnexisrisk.com

View original content to download multimedia:https://www.prnewswire.com/news-releases/lexisnexis-risk-solutions-report-reveals-the-yearly-cost-of-financial-crime-compliance-reaching-56-7-billion-a-13-6-increase-for-financial-institutions-in-the-united-states-and-canada-combined-301633828.html

SOURCE LexisNexis Risk Solutions