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North American Financial Services Firms Spend More than $31.5 Billion a Year on Anti-Money Laundering Compliance According to LexisNexis Risk Solutions Study

Study Finds That Firms Failing to Leverage Effective Compliance Technologies Shoulder Disproportionate Cost 

07/23/2019

ATLANTA — Today, LexisNexis® Risk Solutions released its study on the True Cost of Anti-Money Laundering (AML) Compliance in the United States and Canada, which revealed the spend for U.S. and Canadian financial services exceeds $31.5 billion per year. The survey queried 140 decision-makers who oversee FCC compliance processes including but not limited to customer onboarding, identity verification, investigations, watchlist screening and transaction monitoring. 

Key Findings from the Report
  • Small firms use more labor: Smaller firms tend to use less AML compliance technology to support due diligence, with labor constituting a large share of the total compliance spend (61% - 62%). 
  • Mid-to-large firm labor costs also outweigh technology: Although mid-to-large firms use more compliance technology, there still is a slight weight towards labor at a 53% average portion of compliance spend as compared to a 45% average for technology investments. 
  • Annual AML compliance spend per firm is similar in Canada and U.S.: $1.4 million for small Canadian firms; $1.5 million for small U.S. firms; $14 million for mid-to-large Canadian firms; $14.3 million for mid-to-large U.S. firms.
  • Smaller firms pay more: Smaller firms (less than $10 billion total assets) represent just under half of the total cost of compliance in the U.S. market ($13.9 billion).

“U.S. and Canadian financial firms effectively leveraging compliance technologies spend an average of $78,000 annually per full time compliance employee versus $140,000 for those who don’t,” said Daniel Wager, vice president, global financial crime compliance strategy for LexisNexis Risk Solutions. “This is significant, as human resource costs tend to trend upwards year-over-year and most sharply when firms are faced with increasing regulatory pressure or potential enforcement.”

Wager continued, “As compliance regulations grow in complexity, North American financial firms will be challenged to protect their reputation and avoid costly enforcement actions. The common reaction of adding more labor resources will not result in a profitable long-term solution, but instead often leads to diminishing returns, especially if investments in technology don’t keep pace. Combining the right core data quality with technology results in cost savings, more effective compliance and smoother customer acquisition. With faster due diligence, reduced friction and a more comprehensive understanding of customers, financial institutions often see a reduction in financial crime over the long term.”

Download a copy of the report here.

Daniel Wager, vice president, global financial crime compliance strategy for LexisNexis Risk Solutions, is hosting a webinar on July 30, 2019 at 2PM ET to review report findings. Register here

About LexisNexis Risk Solutions
LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.

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