Compliance professionals in the financial services sector are struggling to implement AML regulations, with over 90pc looking for more guidance from regulators, according to a poll conducted by LexisNexis Risk Solutions.

The poll suggests that compliance professionals in banking, lending and wealth management are only 60% of the way through implementation programmes for the Fifth Money Laundering Directive, despite it having come into force well over a year ago.

By sector, banks were the furthest behind in their implementation plans (57% complete), followed by lenders (61%) and wealth management (62%). Any delay in compliance with 5MLD regulations puts firms at risk of severe penalties from the Financial Conduct Authority, as well as increased risk of being exposed to the proceeds of crime.

The majority of the survey’s respondents predict that the regulator will begin to clamp down on non-compliance within the next 6 months or sooner.

On the positive side, the research revealed clear support for 5MLD amongst firms, with almost two thirds (63%) of firms agreeing that the directive will have a positive impact when detecting and preventing financial crime in the UK. Banks were the least optimistic about its impact, with just over half agreeing (56%). Firms were on average expecting to spend between £500,000 to £1m on their implementation projects.

These insights follow in-depth research conducted by LexisNexis Risk Solutions and Oxford Economics, in conjunction with the Cabinet Office which found that UK financial services firms are already spending a total of £28.7bn on compliance processes annually. It also revealed that 70% of firms’ compliance budgets are spent on compliance staff and training. Over 50% of compliance work typically relates to customer due diligence processes and a further 14% to investigations and information gathering.

Nina Kerkez, director of consulting at LexisNexis Risk Solutions, comments: “These two pieces of research together paint a grim picture of the UK compliance landscape – one in which firms are spending considerable time, money and effort on an ineffective system that isn’t coming close to addressing the issues for which they’re intended. Regulated firms are united in being overwhelmed by increasing regulation and unanimous in their plea for more support.

“Yet, despite the ticking time bomb of a regulatory clamp-down, firms appear to be ‘kicking the can down the road’ with short-term fixes – throwing budget at ‘people power’, increasing the size of compliance teams and investing in training to tackle the problem. Unfortunately, this doesn’t necessarily lead to greater efficiency and it avoids the wider issue of needing to re-configure their compliance approach in line with 5MLD requirements.”

The research was undertaken throughout March 2021 with 375 compliance professionals, equally split across the banking, wealth management and lending sectors.

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