No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • 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
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe
Jump to a Section
  • At the Office
    • Ethics
    • HR Compliance
    • Leadership & Career
    • Well-Being at Work
  • Compliance & Risk
    • Compliance
    • FCPA
    • Fraud
    • Risk
  • Finserv & Audit
    • Financial Services
    • Internal Audit
  • Governance
    • ESG
    • Getting Governance Right
  • Infosec
    • Cybersecurity
    • Data Privacy
  • Opinion
    • Adam Balfour
    • Jim DeLoach
    • Mary Shirley
    • Yan Tougas
No Result
View All Result
Corporate Compliance Insights
Home Compliance

Financial Crime Compliance Costs Spiked 33% in 2020. Will They Correct in 2021?

Customer Risk Profiling and Sanctions Screening Have Proven Major Drivers of Increased Costs.

by Leslie Bailey
June 9, 2021
in Compliance, Financial Services
Wall Street in New York

Between COVID-19 disruptions, KYC challenges, paused account onboarding and altered due diligence practices, 2020 saw financial crime compliance costs increase by roughly one-third. It remains unclear to what extent those trends will continue this year.

There’s no doubt 2020 has brought many unforeseen hurdles to financial institutions (FIs) like banks and investment, asset management and insurance firms. With those challenges also comes opportunity. What is the business impact of the pandemic on compliance departments? To fully answer the question, we conducted a survey in October 2020 of compliance professionals in United States and Canada to identify the drivers affecting financial crime compliance and how they impact spending and productivity. This included understanding spending by cost of compliance area – sanctions screening, transaction monitoring, technology, know your customer (KYC), due diligence, etc. – and associated human resources costs.

We also explored what FIs have experienced during the COVID-19 pandemic, some of which continues to test the resilience and agility of businesses across many markets. Compliance departments cite several issues, including accessing information sources for KYC due diligence and new account onboarding delays. 

Our survey found that the cost of financial crime compliance rose sharply since 2019, up to a projected $42 billion across U.S. and Canadian financial firms in 2020, a 33 percent jump from 2019’s total projected cost of $31.5 billion. The study projects the cost in 2020 to be $35.2 billion in the U.S. alone, with Canadian FIs contributing $6.8 billion to the overall figure. What is driving this cost increase?



The Impact of COVID-19 on Financial Crime Compliance Costs

Compliance departments at both large and small FIs have faced a variety of changes during the pandemic and resultant remote working period. Financial crime compliance professionals in the U.S. attribute an average of 23 percent of financial crime compliance cost increases to COVID-19. This stems partially from the implementation of the Paycheck Protection Program (PPP) and increased manual labor costs for FIs to screen for lending-related financial crimes like money laundering. The PPP came swiftly and put pressure on compliance teams to adapt, some even developing new protocols for due diligence in response to differing standards between the Small Business Administration (SBA) and customer due diligence (CDD) beneficial ownership requirements.

The pandemic and other uncertainties increased the risk for financial crime, putting FIs in danger of noncompliance. One notable source of heightened risk over the past year centers on cryptocurrency transactions – these can present issues for due diligence and beneficial ownership.

The top three issues most compliance departments contend with are:

  • Difficulty accessing information sources for KYC due diligence (41 percent),
  • Challenges from delayed new account onboarding (41 percent) and
  • Longer times to complete due diligence for onboarding new accounts (38 percent).

Operational difficulties arising from COVID-19 protocols and subsequent remote working requirements have also negatively impacted the effectiveness and efficiency of key compliance activities. Respondents reported a moderate to significant negative impact on:

  • Customer risk profiling (91 percent),
  • Sanctions screening (83 percent),
  • KYC for account onboarding (78 percent),
  • Efficient resolution of alerts (74 percent) and
  • Positive identification of sanctioned entities or politically exposed persons (PEPs) (61 percent).

Increased Regulatory Pressure

Regulations continue to put pressure on U.S. and Canadian FIs. The Financial Crimes Enforcement Network (FinCEN) and federal and state financial regulators have increased scrutiny of anti-money laundering and combating the financing of terrorism (AML/CFT) compliance violations and have prioritized these actions. Also added to the mix: FIs are increasingly grappling with issues surrounding due diligence and beneficial ownership arising from digital assets and transactions involving cryptocurrency. To that end, the survey found that a majority of FIs now have formal processes in place for identifying and tracking new types of crime and criminal methodologies.

Canada’s Office of the Superintendent of Financial Institutions (OSFI) increased risk assessments on banks to tighten compliance and bring about changes to Canadian AML laws. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) continues to place pressure on FIs to strengthen customer due diligence around ultimate beneficial ownership (UBO). All this adds up to a greater burden on compliance departments. Technology can be the answer to this burden.

Good Technology Lowers Costs

The study shows that FIs who invested in technology solutions to support financial crime compliance experienced lower cost increases and fewer negative impacts from COVID-19. Year-over-year compliance cost increases proved lower for FIs that allocated more spend to technology. These FIs also noted greater efficiencies. Larger FIs with more than $10 billion in assets in the U.S. and Canada who allocated at least 50 percent of their compliance costs to technology spent $5 million less on average in annual costs in 2020 than FIs who allocated 35 percent or less.

Skilled compliance professionals will certainly continue to be in demand as financial crime grows in complexity, yet skilled labor is scarce in this market. Financial firms should consider fast-tracking efforts to implement compliance technology to drive operational efficiency and better utilize their high-value resources.

So, What Now?

There are several implications revealed by the study. What’s clear is that U.S. and Canadian FIs should prepare for increased risks of financial crime for the foreseeable future. It is unclear what the landscape will look like over the next one to two years, but FIs should anticipate facing greater spikes in financial crime, particularly as digital/cryptocurrency transactions provide new criminal opportunities.

Financial firms that have invested in compliance technology will be better prepared to deal with the new normal and weather sudden changes. As the cost of doing business rises in the COVID-19 environment and beyond, the added cost of compliance may reach a tipping point where adding more labor to solve complex compliance matters may result in diminishing returns for FIs. 

In addition to implementing new compliance technologies, it is difficult for FIs to make well-informed risk decisions without robust and comprehensive data. Ultimately, one of the best paths forward involves rigorous investigative tactics that vet the most current data and customized delivery systems that adapt to the user.

Having comprehensive data and highly capable solutions generates a degree of utility for not just compliance, but other functional areas as well, such as business development and marketing. Knowing more about customers can help FIs present the right products and services for cross-selling initiatives. 

Compliance departments at FIs have faced unprecedented challenges during the pandemic. While 2020 was difficult for the industry, compliance teams can become more effective and efficient with essential compliance activities through a risk-responsive financial crime compliance strategy and a multilayered solution approach to due diligence and financial crime risk assessment. Efficient technology, intuitive analytics and extensive global risk intelligence give FIs the insight they need to better navigate the new normal brought on by the pandemic, like cryptocurrencies and digital assets, while maintaining integrity throughout the customer experience.


Tags: Financial CrimeKnow Your Customer (KYC)Sanctions
Previous Post

QuantaVerse Introduces Fast Start Program to Speed and Improve the High-Risk Entity Review Process

Next Post

From Awkward to Organic

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

boundary line on roadway

Reckless or Just Unprepared? How UK Tribunals Are Drawing Lines on Financial Integrity

by David Hamilton
June 2, 2025

Courts increasingly distinguish between personal failings and systemic compliance gaps when assessing whether financial professionals acted with integrity

monies illustrating money laundering

Power Shift: What Happens When America Steps Back From Global AML Enforcement?

by Joe Biddle
April 15, 2025

EU's new anti-money laundering authority emerges as potential counterweight amid uncertain US priorities

LexisNexis Sanctions Pusle 2024

Sanctions Pulse 2024

by Corporate Compliance Insights
April 10, 2025

How prepared is your organization for the new era of heightened sanctions activity? Annual sanctions report Sanctions Pulse: Looking Back...

robot reading book generated by ai

Teaching Machines to Spot What Matters

by Kevin Lee
April 8, 2025

How emerging technologies are transforming inefficient alert systems and reshaping financial crime prevention

Next Post
overhead shot of two people holding coffee cups as if in conversation

From Awkward to Organic

No Result
View All Result

Privacy Policy | AI 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
  • Research
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2025 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
No Result
View All Result
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • 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
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe

© 2025 Corporate Compliance Insights