A recent report published by LexisNexis Risk Solutions ("LNRS") in association with Oxford Economics has suggested that technology and data should be harnessed more effectively by financial institutions in order to curtail the increasing cost of Anti-Money Laundering ("AML") compliance. In December 2020, LNRS surveyed over 300 senior compliance officers aiming to estimate the cost of AML compliance, identify budgeting trends and outline potential solutions for organisations concerned with escalating costs.
After illustrating a steady increase in the cost of AML compliance over the last 3 years, the report states that many financial institutions expect spending to increase significantly in the short to medium term. Increased costs have been driven by a 'culture of over-cautiousness' as financial institutions take expensive steps in fear of being fined by the FCA for non-compliance. This issue is expected to be exacerbated over the next few years following Brexit if the regulatory landscape in the UK becomes more complex as is anticipated.
The central finding of the report is that organisations should consider refocussing their budgets around technology as customer onboarding has become increasingly labour intensive as businesses aim to protect themselves by throwing more and more people into the process. Looking more broadly, there appears to be growing consensus that a change in approach is needed; albeit a viewpoint often championed by those (including LNRS) aiming to sell such technology.
If financial institutions are to further leverage technology to reduce AML costs they may need to do so carefully. When implemented effectively technology can empower employees, raise productivity, cut costs and boost customer satisfaction. However, there are a myriad of AML solution providers in a highly competitive marketplace. Furthermore, commentators suggest that the greatest results are witnessed by organisations deploying multiple AML technologies. Financial institutions may need to undertake robust due diligence & ROI assessments in order to avoid costly mistakes. Successful evaluations will require organisations to have a clear understanding of what they are trying to achieve so they can identify the correct blend of technology to deliver the outcomes they desire.
Related Source: Lexis Nexis