Financial Crime Compliance Costs Increasing, Survey Finds

A global survey by LexisNexis® Risk Solutions queried over 100 banks and investment firms in the U.S. and Canada regarding their compliance costs related to financial crimes. According to The True Cost of Financial Crime Compliance study, the cost of financial crime compliance continues to rise sharply over pre-and early-COVID-19 periods due to labor, increasing regulations and evolving criminal threats. The study found that these compliance costs increased by 95% for mid and large U.S. firms over the last year ($32.0M for Mid/Large U.S. Banks in 2021 compared to $25.6M in 2020). The study also found that firms expect to spend an average of $27.8 million on compliance operations in 2021, compared to $20.5 million in 2020 and $14.3 million in 2019. Financial crime involving digital payments and cryptocurrency are on the rise and having the greatest impact on increasing financial crime compliance costs, the study reports, and new regulations specific to digital transactions and currency will continue to add pressure and compliance cost to financial institutions. A majority of firms stated that their top reason for hiring more compliance staff was the increased workload due to increasing compliance regulations, including recent anti-money laundering rules.