A new report has found that financial institutions across the globe spent just under £147 billion on financial crime compliance worldwide last year, up seven percent on the previous year. The surprising news was that European firms, with those in the UK ranking particularly high, spent a staggering three to four times more than their counterparts in North America.
The True Cost of Financial Crime Compliance Global Report, compiled and released by data and analytics firm LexisNexis Risk Solutions, estimated that the annual cost of financial crime compliance in Europe was £111 billion, followed by North America (£26 billion), Asia Pacific (£5 billion), Latin America (£4 billion) and South Africa (£1.6 billion).
This news comes after the UK Government’s Cyber Security Breaches Survey 2019 revealed that 32 percent of businesses had identified cyber security breaches or attacks in the past 12 months, costing an average of £4,180 as a result of lost data or assets. Thirty-two percent required new measure to prevent future attacks, while 27 per cent of staff dropped what they were doing to deal with any breaches
The survey figures were calculated after polling 898 financial crime compliance decision makers. An average spending amount for large, medium and small institutions in a particular market was then compiled. The number of such firms in a given market was then multiplied by that average.
The most expensive countries for financial crime compliance were the United Kingdom (£40 billion) and Germany (£39 billion), followed by the United States (£21 billion), France (£17 billion), Italy (£13 billion) and Canada (£4 billion).
The financial institutions surveyed included banks, investment firms, asset management firms and insurance companies. Compliance professionals included in the survey over saw know your customer remediation, sanctions monitoring, anti-money laundering (AML) transaction monitoring and/or compliance operations.
The United States which, at over 6,000, has the largest number of financial institutions of any territory also has a greater percentage of firms managing under £8 billion in assets. These smaller firms, by and large, predictably had less AML compliance costs to contend with, the survey found. At 2,200, the United Kingdom had the second most institutions, followed by Germany with 1,600.
The survey found that European financial institutions generally had larger compliance departments than those in other regions, with an average of 83 full-time employees, compared to an average of 57 in North America. As a result, European compliance departments required more time to complete their duties on account of due diligence. This was an average of 47 hours versus 25 hours in North America.
“A number of factors make financial crime compliance more costly in Europe, including increasingly complex regulations, data privacy limitations, sanctions violations and labour costs,” the report concluded.
Challenges with the European Union’s privacy law, GDPR, were one cost driver, stated the report. This is because the regulations require more documentation and paperwork to satisfy regulators. European firms also reported running foul of US sanction violations more often than their American or Canadian counterparts.
Additionally, the survey found that compliance teams are stressed to a degree where managers worry about retaining skilled professionals. In fact, 67 percent of compliance decision makers were concerned with job satisfaction within their workforce.
On salaries, compliance professionals with 10 or more years’ worth of experience working for mid-level and large financial institutions could expect to earn £116,873 per year in the United States and Canada, compared to £89,976 per year in Europe, the report said.
From our perspective, we believe that as criminals become more sophisticated with their approach, tackling financial crime in a cohesive and comprehensive manner is essential for implementing a more cost-efficient and effective compliance solution. This is because financial crime challenges and issues tend to have a negative impact on productivity and new customer acquisitions at financial institutions.
The good news is that right now, there is increased recognition among financial institutions that financial crime compliance initiatives provide broad benefits and with this comes a greater willingness to provide opportunities for training and career development.
Using the right technologies, staff, interview and onboarding techniques as workforces grow will allow organisations to tackle the problem head on and not run the risk of losing money and reducing productivity as a result of being a target and subsequent victim of financial crime.
Europe’s high spend on tackling financial crime means that this area provides many rich and varied career opportunities across all industries. To discuss this in more detail, please get in touch with the MERJE team: info@merje.com
