No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home Compliance

Managing the Impact of AML Compliance: Technology vs. Human Capital

What Are Complex Compliance Challenges Really Costing Businesses?

by Leslie Bailey
November 8, 2019
in Compliance, Financial Services
illustration of tug of war between AI robot and three businessmen

As compliance regulations grow in complexity, organizations will need to both protect their reputation and avoid costly enforcement actions. LexisNexis Risk Solutions’ Leslie Bailey discusses how best to manage the challenge.

Anti-money laundering (AML) compliance costs have continued to increase at a dramatic pace. Our recent study projected that the cost of compliance for U.S. and Canadian financial services firms will total $31.5 billion this year. For large and small banks alike, the compliance landscape is complicated by rigorous and evolving regulatory demands, stringent sanctions requirements and a rapidly growing footprint of non-bank payment providers.

The report, devised from a survey of nearly 150 financial crime compliance executives at banks, as well as investment, asset management and insurance firms, found that AML compliance costs increased by 16 percent on average over the last 24 months for U.S. financial services firms, with Canadian firms seeing a 6 percent rise over the same period. Those numbers are expected to keep rising.

Keeping pace with the current environment of escalating, continually evolving global regulatory requirements places a great deal of cost and operational burdens on financial services firms. Balancing optimal compliance with core business objectives and competitive pressures further complicates the cost outlook.

Optimizing Your Compliance Workforce

Labor and technology represent the biggest compliance cost outlays for most financial services firms. Despite the significant amount spent on labor, productivity challenges and concerns about compliance workforce job satisfaction show no sign of letting up. This indicates that adding more human resources is not a sustainable answer to the growing complexities of the AML compliance environment. These costs can rise sharply where financial firms feel the need for more skilled resources to address more complex compliance decisions.

More skilled labor demand increases salary demands, especially if there is a limited universe of skilled resources that firms are fighting for. For instance, as the EU has implemented stricter regulations concerning financial crime, banks in the United Kingdom have faced increased workloads and labor costs. Further, without the support of expanded data sources, bad data can lead to bad decisions, regardless of the number of human resources applied to a case.

Financial institutions may not even suffer from bad data, but instead disjointed data or data that isn’t unified. As a result, it takes the human compliance workforce longer to parse through all the data to look for patterns. Technology and subject matter expertise are not necessarily sufficient, which leads to the need for expanded data. Expanding your data to combine internal and external sources is great, but it may not achieve the efficiencies nor the insights needed unless you find a unified delivery mechanism like customer life cycle management.

The Risks of Siloed Compliance

In order to future-proof a financial institution, executives must find the synergies that already exist in their businesses. As expected, our study revealed that human capital is a significant cost, driven in large part by the silos that exist between groups with overlapping, but unoptimized, responsibilities. It’s clear that those silos won’t go away overnight, but present a significant opportunity to streamline existing processes in preparation for future changes.

This isn’t a question of simply adding more technology, which does come with a human and financial investment. Instead, executives must think about aligning technological solutions with the risks they face across their business and expanding their toolkit to combat these issues cohesively. In other words, executives should look not only to combine technology with subject matter expertise, but also at ways to empower technology and subject matter experts across their business.

When you create a synergy across resources that work independently but are trying to accomplish the same goal, you are one step closer to a unified view of the customer, more meaningful analysis, more efficient operations and higher employee engagement. And you’ll actually have better insight into customer identification. That then helps with any enhanced due diligence and/or investigation because you leverage the same tool to get the same outcome.

Measuring Compliance Program Effectiveness

It’s a given that maintaining an effective, cost-efficient compliance program is essential in order for a business to survive the complex and changing global compliance climate and flourish in the competitive and fast-moving marketplace. Technology plays an important role in effectively managing the impact of AML compliance on the business. Optimizing a compliance program is about managing more than just the direct costs, however; it requires also managing indirect and opportunity costs, which can be harder to measure.

These opportunity costs go beyond lost prospects and future revenues associated with customer friction and delays at onboarding. Missing a holistic view with KYC and customer identification also adds the risk of letting “bad actors” in the door, increasing the potential for a business to incur hefty fines and reputational damage. Having accurate data and highly capable solutions generates a degree of utility for not just compliance, but other functional areas as well. This includes business development and marketing; knowing more about customers can help inform the right products and services to position with customers.

Our study showed that half or more of financial institutions are somewhat or very concerned about job satisfaction among their compliance staff. The data makes sense: If you worked in a job that was high-stress, had zero tolerance for error because of regulatory requirements and required you to spend your day screening names for red flags, you might not come to work every day brimming with enthusiasm. But if your job gave you the tools to draw valuable insights and identify key risks because you were able to unify internal and external data in order to identify not only a fraud risk, but also an individual with a loose affiliation to a known money launderer tied to human trafficking, then you would likely feel more accomplished!

In other words, as compliance regulations continue to grow in complexity, North American financial firms will be challenged to protect their reputation and avoid costly enforcement actions. The common reaction to add 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. The cost of human resources almost always trends upward, while mechanically adding headcount in order to meet stricter regulations also can lead to increased dissatisfaction and turnover.

But implementing a dynamic approach to AML compliance technology is one that allows businesses to not only optimize their compliance spending, but also empower their workforce to make more impactful decisions. Just as adding additional compliance employees is a decision that should be approached thoughtfully, so should the addition and implementation of new technology.

Technology solutions that help compliance teams analyze existing data, provide access to other external information and enable them to make decisions from a more holistic view of the customer can reduce onboarding times, decrease remediation costs, lower processing times, increase throughput (without hiring more people) and create a more effective means of preventing financial crime over the long term. It’s important to be thoughtful about how you evaluate and operationalize your technology so that the people on your staff aren’t wasting their time on false positives. That’s when your compliance program is performing at its peak.


Tags: AMLReputation Risk
Previous Post

CCPA Puts Consumers in Control of Their Data

Next Post

Inconsistencies in FCPA Enforcement: Key Considerations for a Potential FCPA Voluntary Disclosure

Leslie Bailey

Leslie Bailey

Leslie Bailey is the senior director of business services for LexisNexis Risk Solutions. She directs market strategy for the company’s financial crime compliance solution. Based in Alabama, Leslie has extensive experience in financial services operations and preventing financial crimes for U.S. businesses.

Related Posts

Phaxis 100 dollars

AML & KYC: Addressing Key Challenges for 2023 and Beyond

by Alex Roberto
March 16, 2023

(Sponsored) In today’s world, financial criminals are often a step ahead of regulators and financial institutions who struggle to effectively...

Paul Weiss Economic Sanctions and AML Developments 2022_f

Economic Sanctions and AML Developments

by Corporate Compliance Insights
March 15, 2023

Sanctions start high and stay high 2022 Year in Review Economic Sanctions and AML Developments What’s in this report from...

money laundering concept

It Takes a Village: Preventing FinCrime Means Everybody Needs Skin in the Game

by Samar Pratt
March 15, 2023

Banks bear the brunt of consequences for financial crimes amid a huge increase in anti-money laundering fines in 2022, making...

russia sanctions

Why Russian Sanctions Require Compliance Teams to Take a Fresh Look at KYC Procedures

by Rory Doyle
February 15, 2023

The Russian invasion of Ukraine continues with no signs of a resolution, and along with the protracted conflict, the U.S....

Next Post
FCPA in neon on black brackground

Inconsistencies in FCPA Enforcement: Key Considerations for a Potential FCPA Voluntary Disclosure

Compliance Job Interview Q&A

Jump to a Topic

AML Anti-Bribery Anti-Corruption Artificial Intelligence (AI) Automation Banking Board of Directors Board Risk Oversight Business Continuity Planning California Consumer Privacy Act (CCPA) Code of Conduct Communications Management Corporate Culture COVID-19 Cryptocurrency Culture of Ethics Cybercrime Cyber Risk Data Analytics Data Breach Data Governance DOJ Download Due Diligence Enterprise Risk Management (ERM) ESG FCPA Enforcement Actions Financial Crime Financial Crimes Enforcement Network (FinCEN) GDPR HIPAA Know Your Customer (KYC) Machine Learning Monitoring RegTech Reputation Risk Risk Assessment SEC Social Media Risk Supply Chain Technology Third Party Risk Management Tone at the Top Training Whistleblowing
No Result
View All Result

Privacy Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2022 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe

© 2022 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT