AI is among the solutions being deployed to keep in line with regulators
The financial services industry is spending a fortune on compliance amid increasing threats from financial crimes.
According to new figures from LexisNexis, the global cost of compliance for financial institutions is US$206.1 billion, equivalent to 12% of research and development expenditure and to $3.33 for every working age individual on the planet.
The findings are from a poll of 1,181 financial crime compliance professions in Canada, the US, Asia Pacific, Latin America, and EMEA.
"The financial impact of crime resonates through businesses' financial statements and consumers' wallets," said Grayson Clarke, senior vice president, 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.”
The cost of compliance has increased from $214 billion in 2022 and from just $34 billion in 2020.
Artificial intelligence
Artificial intelligence and machine learning are set to have an increasing influence in compliance and 72% of respondents already employ analytics and AI to enhance their compliance procedures. However, outdated legacy systems and lack of internal collaboration are among the issues that can create avoidable compliance activity and expenditure.
“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."
The study found that C-suite executives are not complacent about financial crime compliance and 85% of financial institutions place enhancing customer experience at the top of their priority list.
Read more: Brace for impact of emerging technologies
