The total projected cost of financial crime compliance in the US and Canada for 2022 is up 13.6 per cent from 2021 to US$56.7 billion, according to a survey of North American financial institutions by Lexis Nexis Risk Solutions.
The majority of the increased cost is due to spending incurred by mid- to large-sized firms that rank sanctions screening as top challenge that tend to have a higher average cost of compliance compared to those that do not rank this as a challenge.
Sanctions and TBML
Larger US financial firms’ costs continue to rise sharply based on regulatory impacts, increased financial crime exposure and labour, according to the survey which also points to an upswing in technology investment compared to previous years.
The Anti-Money Laundering Act of 2020 (AMLA) has particularly impacted larger US financial institutions and their compliance costs while increased geopolitical risks have also had an impact as well as significant sanctions against Russia according to Lexis Nexis.
It says North American financial institutions continue facing increased exposure to trade-based money laundering (TBML) schemes as well as crimes involving digital payments and the proceeds of trafficking.
Key compliance operations challenges include regulatory reporting, customer risk profiling and digital identity verification according to the 121 US and 29 Canadian respondents questioned for the study.
Respondents included decision makers within the financial crime function at banks, investment firms, asset management firms and insurance firms who oversee know-your-customer remediation, sanctions monitoring, financial crime transaction monitoring or compliance operations.
For US firms, politically exposed person (PEP) identification and sanctions screening are also requiring attention. Across firms, there is need for more digital identity attribute data and analysis the study says.
The combination of these challenges and increased crime exposures are impacting productivity, due diligence times and new customer acquisition according to the study.
It concludes that due diligence is continuing to take longer for business accounts, with AMLA and the Enablers Act expected to add more time and pressure.
The study by Lexis Nexis Risk Solutions, True Cost of Financial Crime Compliance Study, United States and Canada Edition, September 2022, can be found here.
Categories: Trade Based Financial crimes News