Banks invested in digital transformation, but spending 70 per cent of AML budgets on labour says LexisNexis study

Banks in the UK are spending £30 billion (US$34 billion) annually complying with anti-money laundering (AML) regulation, with three-quarters of budgets spent on people and only a quarter spent on technology according to a survey commissioned and published by LexisNexis Risk Solutions

The study, Tech Blockers 2022, aims to shed light on the underlying organisational, financial and procedural drivers behind firms’ approaches to AML compliance, and suggests a strong appetite for greater automation, integration and digital transformation.

Labour costs dominate

The survey of 301 heads of financial crime compliance within financial services, found that people-related costs were dominating financial crime compliance budgets, with 70 per cent spent on hiring, training, and retaining staff and just under 25 per cent spent on systems, solutions and data technology.

The report suggests this leaves room for significant gains in both efficiency and cost effectiveness through greater use of data and technology.

Harnessing technology

This could include harnessing technology to process greater volumes of customer onboarding checks; increase efficiency by performing existing checks in less time, and reduce costs and false positives suggests the report.

It says staff time could then be freed up and spent on higher value-add compliance activities and provide opportunities to focus more on prevention, rather than relying too heavily on detection.

Opportunities and challenges

The study includes a series of in-depth interviews to understand why the bulk of AML spending is directed at labour costs rather than technology and whether this balance is expected to change in the foreseeable future.

The report concludes that the banking sector is fully invested in the need for automation, integration, and full digital transformation, but while financial institutions understand the benefits, they also face a range of different hurdles depending on the size and age of the organisation.

The study, Tech Blockers 2022, can downloaded to computers by submitting a request here.


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