A multi-layered approach to due diligence and risk assessment is crucial

Financial institutions across the Asia Pacific region are reporting increased exposure to a wide range of financial crime. This has pushed the cost of financial crime compliance for financial institutions across the region to a record $50.1bn, according to LexisNexis® True Cost of Compliance™ Study, APAC Edition.

The study of 253 institutions in five markets – China, Australia, India, Malaysia and Japan reveal that the average cost of compliance per financial institution has reached $11.3m annually. 

Key findings include:

  • Increased geopolitical risk, AML regulation and evolving criminal threats are the top three market trends impacting increased compliance costs.
  • APAC financial institutions are facing challenges in compliance screening and due diligence. The key reason is, increasing level of exposure to evolving financial crimes involving digital payments, cryptocurrency, third parties and trafficking of proceeds.
  • Larger APAC financial institutions rank KYC for account on-boarding, positive identification of PEP/sanctioned entities and regulatory reporting as their top compliance screening challenges.
  • The increase in financial crime and regulations, along with COVD-19, has negatively impacted APAC financial institutions’ productivity and on-boarding for new customer accounts. Money mules and digital payments crime have contributed to this.
  • Financial institutions that have invested in technology solutions, to support financial crime compliance efforts, have experienced less severe impacts to cost and compliance operations.

Cost of Financial Crime Australia

Cost of Financial Crime China

Cost of Financial Crime India

Cost of Financial Crime Japan

Cost of Financial Crime Malaysia

Source: LexisNexis Risk Solutions