Hong Kong – Around 98% of financial institutions experienced increased financial crime compliance costs in 2023, resulting in a total expenditure of $US45b in the Asia-Pacific region. These figures underscore the rising costs of financial crime compliance across Asia-Pacific, according to LexisNexis Risk Solutions.
In this report, financial institutions are exploring various avenues to reduce costs while adhering to regulations. In particular, 39% of respondents cited the increase in financial crime regulations and regulatory expectations as the primary factor in increasing compliance costs.
On the other hand, more than half (81%) of financial institutions are prioritising compliance programme cost reductions over the next 12 months.
Findings of the study also revealed that technology costs are among the key drivers of the increasing costs, with 70% of organisations noticing rises in technology costs related to compliance/know-your-customer (KYC) software.
A significant 74% increase was also observed to be associated with networks, systems, and remote work.
Furthermore, approximately 75% of institutions in the Asia-Pacific have also identified labour costs as a significant factor in the cost escalation. This implies the crucial importance of investing in highly qualified compliance professionals to effectively address stringent compliance requirements.
Meanwhile, the study also showed that cryptocurrencies, digital payments, and AI technologies are increasingly being used for illicit activities.
According to the report, organisations also struggle to cope with the impact of these criminal methods, with financial institutions having observed significant increases of more than 20% in various types of financial crime over the past 12 months.
In particular, 23% of them reported encountering financial crime involving cryptocurrencies, while another 23% noted an increased use of artificial intelligence in financial crime.
Talking about the report, Matt Michaud, global head of financial crime compliance at LexisNexis Risk Solutions, said, “The cost of financial crime compliance is clearly rising for financial institutions across APAC, which is being felt by teams across the compliance workflow.”
“Skilled in-house compliance teams are essential, but businesses should be actively seeking ways to reduce labour costs while improving compliance efficiency. Criminals adapt quickly, and FIs require a partner with advanced tools, data, and analytics to not only keep pace but to stay ahead,” added Matt.
In addition to these findings, the study also found out that despite the threats in the current landscape, financial institutions are actively seeking ways to combat financial crimes. This includes finding a balance between compliance effectiveness and customer experience, adopting new technologies to combat emerging financial crimes, and utilising compliance tools and analytics to control costs and improve efficiency.
