A Year in Review: LexisNexis Risk Solutions Survey Uncovers Impacts of COVID-19 Pandemic on Financial Crime Compliance for Financial Institutions
The U.S. and Canadian Compliance Industry Reveal Compliance Costs Drivers in 2020
LexisNexis® Risk Solutions has published an infographic summarizing the survey results of U.S. and Canadian compliance professionals on the range of challenges that financial institutions have experienced during the COVID-19 pandemic. The survey outlines the issues that many financial institutions encounter today and finds that the pandemic continues to test the resilience and agility of businesses across every market.
Respondents from banks, investment firms, asset managers and insurance firms answered a series of questions that would help determine the business impact that the pandemic has had on compliance departments. The top three issues that compliance departments within financial institutions have experienced during the COVID-19 pandemic are:
- 42% face difficulty accessing information sources for Know Your Customer (KYC) due diligence
- 41% realize challenges tied to delayed new account onboarding
- 38% experience longer times to complete due diligence for onboarding new accounts
COVID-19 protocols and subsequent remote working requirements are also negatively impacting the effectiveness and efficiency of key compliance activities. The compliance professionals surveyed highlighted several important aspects of their positions that stand out as particular problem areas. Percentage of compliance professionals reporting negatively impacted areas:
- Customer risk profiling – 91%
- Sanctions screening – 83%
- KYC for account onboarding – 78%
- Efficient resolution of alerts – 74%
The ongoing pandemic-related pressures that compliance departments face will likely also drive increased compliance costs in the future. This is true for financial institutions of all sizes. While technology seems to be a greater cost factor for larger financial institutions, labor costs impact smaller institutions on a greater scale.
- 79% expect COVID-19 to drive financial crime compliance costs during the next 12 to 24 months
- 68% of the increased spend will be allocated to technology resources due to COVID-19
- 32% of the increased costs will be spent on labor resources due to COVID-19
“The events of 2020 have been unprecedented and financial institutions must prepare for increased risk of financial crime for the foreseeable future,” said Leslie Bailey, senior director of financial crime compliance strategy for LexisNexis Risk Solutions. “Compliance teams can optimize resources to better navigate the new normal brought by the pandemic while maintaining the customer experience with a multi-faceted approach that includes efficient technology, intuitive analytics and extensive global risk intelligence.”
Download a copy of the Impacts of the Global Pandemic on Financial Crime Compliance infographic.
The study surveyed 150 decision-makers in the U.S. and Canada who oversee financial crime compliance processes at their companies, including but not limited to sanctions monitoring, Know Your Customer (KYC) remediation and anti-money laundering (AML) transaction monitoring. Organizations included banks, investment firms, asset management firms and insurance firms. The total annual cost of compliance across firms was calculated using survey data on financial crime costs, as a percent of total assets and secondary data that provides the total assets for all FIs in the U.S. and Canada. The spend amount was generated by multiplying the average percent allocated to financial crime costs by the reported total asset amount.