Compliance technology costs are impacting the bottom lines of Australian financial institutions, according to a new study conducted by LexisNexis Risk Solutions.
The latest study, True Cost of Financial Crime Compliance Study – Asia Pacific, conducted by Forrester Consulting has revealed financial crime compliance costs increased for 98 per cent of financial institutions last year.
It estimated the total cost of financial crime compliance in the APAC region had reached US$45 billion.
The study said financial institutions (FIs) are seeking ways to reduce costs while complying with regulations, with 39 per cent identifying the escalation of financial crime regulations and regulatory expectations as the primary factor driving increases in compliance costs.
It said that (81 per cent) of FIs are prioritising compliance program cost-cutting in the next 12 months.
“The intensifying challenge of keeping up with the complex sanctions environment is leading financial institutions to confront a growing screening workload, resulting in an increase in the number of screening alerts at 79 per cent of organisations,” it said.
.Key findings from the study:
- Technology costs are driving increases in expenses for financial institutions, emphasizing the substantial investment required to meet stringent compliance requirements. Specifically, 70 per cent of organizations noticed rises in technology costs related to compliance/know-your-customer (KYC) software, while technology costs associated with networks, systems and remote work have increased at 74% of FIs.
- Seventy-five per cent of APAC institutions cited labour costs as a primary driver of cost escalation. This emphasizes the investment needed in highly qualified compliance professionals to effectively address and fulfil stringent compliance requirements.
- Cryptocurrencies, digital payments and AI technologies are emerging as tools for illicit activities. Organizations are grappling with the impact of these sophisticated criminal methodologies within an already complex regulatory landscape. When asked about the types of financial crime, FIs had observed significant increases of more than 20 per cent in the past 12 months, with 23 per cent having identified financial crime involving cryptocurrencies, while 23 per cent reported heightened use of artificial intelligence (AI).
“The cost of financial crime compliance is clearly rising for financial institutions across APAC which is being felt by teams across the compliance workflow,” LexisNexis risk solutions global head of financial crime compliance, Matt Michaud said.
“Skilled in-house compliance teams are essential, but businesses should be actively seeking ways to reduce labour costs while improving compliance efficiency. Criminals adapt quickly and FIs require a partner with advanced tools, data and analytics to not only keep pace but to stay ahead.”
