Financial Crime World

Saudi Arabia’s Financial Crime Problem Reaches Alarming Levels, Costing Billions in Compliance Expenses

A Growing Concern: Financial Crime Compliance Costs Reach $1.8 Billion in Saudi Arabia and UAE

A new report by LexisNexis Risk Solutions has shed light on the alarming levels of financial crime compliance costs in Saudi Arabia and the United Arab Emirates (UAE). The study reveals that these costs have skyrocketed to an estimated $1.8 billion last year, with a staggering 98% of decision-makers polled experiencing increased expenses.

Key Findings

  • Labor costs related to compliance accounted for more than 70% of total expenses.
  • Technology costs came in second, accounting for over 74%.
  • External costs related to outsourcing also played a significant role, with 75% of respondents citing this as a major driver of rising compliance expenses.

Major Concerns

The report highlights the following key concerns in both countries:

  • Trade-based money laundering schemes: Financial institutions are vulnerable to these schemes, which involve manipulating trade transactions to conceal illegal activities.
  • Supply chain disruptions: Disruptions can create opportunities for criminal activity, making it essential for financial institutions to monitor their supply chains closely.
  • Bribery within supply chains: The report highlights the need for financial institutions to implement robust anti-bribery measures to prevent corruption.

Regional Perspective

The “True Cost of Financial Crime Compliance Study – Europe, the Middle East, and Africa” estimates that financial crime compliance costs across the region reached a staggering $85 billion last year. Germany, France, and the Netherlands led the way, with the UAE and Saudi Arabia among the top spenders.

Challenges Facing Financial Institutions

Financial institutions in the region are struggling to keep up with the escalating costs of compliance, driven by:

  • Heightened regulatory expectations: Regulatory bodies are increasing their scrutiny of financial institutions, leading to increased compliance burdens.
  • Increased requirements for automation, data, and tools: Financial institutions must invest in technology and personnel to meet these new requirements.
  • Evolving criminal threats: New technologies, such as cryptocurrencies, digital payments, and artificial intelligence (AI), have created new opportunities for criminals.

Solutions

To reduce costs while complying with regulations, financial institutions are prioritizing:

  • Enriched payment data: Using enriched payment data to improve compliance controls and prevent fraud.
  • Optimizing compliance costs: Improving profitability and competitiveness by optimizing compliance costs.

By addressing these challenges and implementing effective solutions, financial institutions can reduce their compliance expenses while maintaining a strong commitment to regulatory compliance.