The real costs of compliance

A recent Lexis/Nexis survey of over 1,000 financial crime compliance decision makers, which focused on finding the true cost of AML/CFT compliance, reported that the total price tag for all financial crime compliance across financial institutions worldwide is somewhere around $213.9 billion—up from $180.9 billion the previous year. The survey was finalized in 2020, so one could estimate with the complexities of COVID-19 factored in (in particular around customer/member due diligence), the real cost figure for 2021 is likely much higher.

Compliance costs increasing at this exponential rate falls disproportionately on smaller financial institutions, especially when compared to the larger banks that have the resources to comply with AML/CFT rules and regulations. More importantly, it often leads to financial exclusion, as it makes it more difficult to serve rural or underserved markets.

So, it is encouraging when I see international standard setters focused on the opportunities and challenges of new technologies and how they can help with compliance and financial inclusion. I urge you to read the article below regarding their recent report which embraces a risk-based approach to AML/CFT risks and proportionality.

 

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