Financial Crime World

Saudi Arabia Sees Significant Increase in Financial Crime Compliance Costs

Financial institutions in Saudi Arabia have faced a substantial increase in financial crime compliance costs, with estimated annual expenditures reaching US$1.8 billion last year. This significant rise is highlighted in a report by LexisNexis Risk Solutions, which explores the growing regulatory pressures and challenges faced by financial institutions in Europe, the Middle East, and Africa (EMEA).

Key Concerns in Saudi Arabia

In Saudi Arabia, trade-based money laundering schemes, supply chain disruptions, and bribery within supply chains have been identified as key concerns. These issues indicate a shifting focus on international trade and emphasize the need for enhanced compliance measures.

  • Trade-Based Money Laundering Schemes: 59% of respondents in Saudi Arabia identified this as a growing concern.
  • Bribery Within Supply Chains: 57% of respondents cited bribery within supply chains as a significant issue.
  • Supply Chain Disruptions: These disruptions pose a challenge to financial institutions, highlighting the need for robust compliance controls.

Global Compliance Costs Reach US$85 Billion

The total cost of financial crime compliance in EMEA reached US$85 billion last year. Germany, France, and the Netherlands led the expenditure, with financial institutions citing heightened regulations, increased requirements for automation, data, and tools to support compliance, and evolving criminal threats as key factors driving the escalation of compliance costs.

Technologies Used for Illicit Activities

The report notes that technologies such as cryptocurrencies, digital payments, and artificial intelligence (AI) are increasingly being used for illicit activities. Financial institutions must adapt to these emerging trends and prioritize compliance to remain competitive in the market.

Reducing Costs while Complying with Regulations

To reduce costs while complying with regulations, financial institutions in EMEA are prioritizing the use of enriched payment data to improve compliance controls and optimizing their compliance costs to remain agile and competitive. In Saudi Arabia, the government has reinforced anti-money laundering (AML) and counter-financing of terrorism (CFT) laws as part of its national development strategy, Vision 2030.

UAE Makes Significant Strides in Addressing Financial Crime

The UAE has also made significant strides in addressing financial crime, including the conclusion of new Mutual Legal Assistance Treaties and bilateral visits to over 20 countries and agencies. The country’s AML/CFT fines imposed by supervisory authorities have exceeded US$67.8 million from January to October last year, a three-fold increase from 2022.

Conclusion

The report highlights the need for financial institutions in Saudi Arabia and the UAE to prioritize compliance and adapt to evolving regulatory requirements to remain competitive in the market. By embracing innovative technologies and strategies, these institutions can reduce costs while effectively addressing the growing challenges of financial crime compliance.