AML compliance costs FIs £28.7bn a year

AML compliance is costing UK financial institutions £28.7bn annually, a figure that is equivalent to more than half of the UK’s 2020 defence budget of £53.3bn, and is set to rise to £30bn by 2023.

This is according to analysis conducted by Oxford Economics for Lexis Nexis Risk Solutions, which, it says, shows that regulation Is the primary driver behind the rising compliance costs as opposed to criminal threats.

The implementation of the Fifth Anti-Money Laundering Directive alone is estimated to be costing the average UK financial institution around three quarters of a million pounds. Changes in data privacy requirements, customer demand for faster payments and increasing geopolitical risks were all cited as key external drivers of increased compliance costs.

Rising costs are compounded by significant AML inefficiencies, the report found, including data quality, system failures, gaps in IT infrastructure, ineffective internal tools and outdated technologies. Adding unnecessarily to the burden, the report also found that firms are creating more work for themselves by erring on the side of caution, as a consequence of a fear of regulatory repercussions, if something is missed.

Steve Elliot, managing director, Business Services UK and Ireland at LexisNexis Risk Solutions commented: “The fact that increasing AML regulations, rather than an evolving criminal threat is the primary driver for increased compliance costs in the UK is a clear sign that the UK’s current AML approach requires wholesale change. Building on past solutions is evidently becoming too costly and ineffective, and so they need to be redesigned for the modern age, using big data and technology instead of rules and manual processing."

    Share Story:

Recent Stories

Cyber physical risks
Property damage as a consequence of cyber attack is often excluded from standard property policies, but as the industrial internet of things expands, so too do the risks. This podcast examines the evolving threat landscape. Published October 2021

Financial institutions were early adopters of cyber security and insurance. Are they still on top of the game?
Managing huge amounts of sensitive data online makes financial institutions a prime target for hackers. As such, the sector was an early cohort for insurers in creating cyber cover. Since then, the market has evolved almost beyond recognition. It continues to challenge itself to this day, complying with rigorous regulatory demands and implementing avant-garde enhancements to keep abreast of the ever-changing risks. Published June 2021