Australian firms spend 3.6bn on financial crimesBY CASSANDRA BALDINI | THURSDAY, 16 JUN 2022 12:59PM
Read more: David Haynes
A new study has shown that Australian financial service companies are expected to spend more than $3.6 billion on financial crime compliance in 2022.
Yesterday LexisNexis Risk Solutions released the first Australian edition of its true cost of compliance study. It revealed costs were driven up by an increase in compliance staff being hired as well as the complexity of preventing financial crime.
The study, which surveyed 50 decision-makers in the Australian market between December 2021 and February 2022 found that the exposure of Australian financial firms to financial crimes has increased in the past 18 to 24 months.
The report said that the total projected cost of financial crime compliance across APAC firms is $50.1 billion for 2022; large banks represent 80% of this.
The average annual cost of compliance per financial institution is highest for mid to large banks ($10 billion plus in asset size.)
Japanese banks spend the most per annum ($28.5M) followed by those in Australia, China and India.
The report stated that labour in the form of salaries is the single largest cost component due to institutions hiring more compliance staff since 2019.
This is due to a rise in anti-money laundering workloads, evolving financial crime and increased regulation.
Respondents also said that 80% of Australian compliance professionals in financial firms ranked money laundering as the highest risk within their compliance operations.
Increasing anti-money laundering regulations, evolving criminal threats and ongoing impacts of the pandemic have increased financial crime compliance costs to an estimated $27.6 million, which has seen more firms invest in technology.
The large financial institutions that invested in the use of technology to solve compliance challenges experienced less severe impacts on cost and compliance operations and saw greater efficiencies and fewer pandemic-related challenges.
Those that spent less than the industry average on technology spent close to $28.7 million on annual financial crime compliance costs.
Money mules and financial crimes involving digital payments are increased and contributed largely to rising financial costs.
Respondents reported increased exposure to trade-based money laundering, third-party fraud, proceeds of trafficking and the criminal use of new technologies and methods, including cryptocurrency.
Lexis Nexis Risk Solutions vice president David Haynes said: "Ecommerce and retail were ranked highest as being of most risk for money laundering by Australian financial institutions.
Haynes added amidst growing regulatory pressures and evolving threats, retailers and ecommerce merchants should be prepared for increased costs brought by the digital transformation.
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