Financial Crime World

Financial Crime Compliance Costs Soar in Indonesia Amid COVID-19 Pandemic

A recent study by LexisNexis Risk Solutions has revealed that financial crime compliance costs have skyrocketed in Indonesia, with the average annual cost per organization reaching $15.93 million. The study highlights the significant impact of the COVID-19 pandemic on financial crime compliance operations, leading to increased alert volumes, delayed onboarding of new accounts, and reduced productivity.

The Impact of the Pandemic

The study found that over half of Indonesian financial institutions have lost at least 25 hours of productivity per full-time employee (FTE) and 3% or more of new customer opportunities due to refused accounts/walkouts during onboarding. The pandemic has also added to year-on-year compliance cost increases, particularly for larger financial firms.

  • Challenges in Maintaining Resource Efficiencies: Indonesian financial institutions are struggling to maintain resource efficiencies and complete KYC due diligence within a reasonable timeframe.
  • Sanctions Screening Challenges: Sanctions screening has become more challenging during the pandemic, with 54% of respondents reporting difficulty accessing KYC/due diligence information.

Key Findings

Financial Crime Compliance Operations Costs

  • Average annual financial crime compliance operations costs per organization: $15.93 million
  • COVID-19 pandemic attributed to 23% of year-on-year compliance cost increases for mid-to-large-sized firms

Productivity and New Customer Opportunities

  • Average loss of productivity per FTE: 25 hours
  • Average loss of new customer opportunities: 3%

Recommendations

Mitigating Risks

  • Invest in technology solutions that can help streamline compliance processes and improve resource efficiencies.
  • Implement robust risk management strategies to mitigate the impact of increased alert volumes.

Prioritizing Compliance Efforts

  • Prioritize sanctions screening and KYC due diligence to ensure efficient onboarding of new accounts.
  • Develop contingency plans to address potential disruptions caused by future pandemics or crises.

By understanding the challenges faced by Indonesian financial institutions and implementing effective risk management strategies, organizations can reduce the impact of the pandemic on their compliance operations and maintain a strong defense against financial crime.