Financial Crime World

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

A new study has revealed that the COVID-19 pandemic has significantly impacted financial crime compliance costs and operations in Indonesia, with many financial institutions struggling to maintain resource efficiencies.

Financial Crime Compliance Challenges

The study, conducted by LexisNexis Risk Solutions, found that over half of Indonesian financial services firms are losing at least 25 hours of productivity per full-time employee (FTE) due to the financial crime compliance process. Moreover, these firms are also missing out on 3% or more of new customer opportunities as a result of refused accounts and walkouts during onboarding.

Compliance Cost Increases

The study also found that COVID-19 has added to year-on-year compliance cost increases, particularly for larger Indonesian financial firms. On average, mid-to-large financial institutions attributed 23% of their year-on-year compliance cost increases to the pandemic.

“COVID-19 has exacerbated existing challenges in financial crime compliance, leading to increased costs and operational inefficiencies,” said [Name], director at LexisNexis Risk Solutions. “Financial institutions need to adapt quickly to these new challenges to maintain business continuity and customer trust.”

Key Areas Impacted

The study highlighted several key areas where the pandemic has impacted financial crime compliance operations:

  • Increased Alert Volumes: Difficulty accessing KYC/due diligence information
  • Longer Onboarding Time: Longer time required to complete due diligence for onboarding
  • Reduced Productivity: Reduced productivity overall
  • Delayed Account Onboarding: Delayed on-boarding of new accounts

Recommendations

To mitigate these impacts, the study recommended that financial institutions:

  • Prioritize Efficient Alert Resolution
  • Enhance Customer Risk Profiling
  • Leverage Technology to Streamline Compliance Processes
  • Develop Contingency Plans for Remote Working and Pandemic-related Disruptions

Key Findings

  • 54% of respondents reported difficulty accessing KYC/due diligence information during the pandemic
  • 49% reported longer time required to complete due diligence for onboarding
  • 53% reported reduced productivity overall
  • 31% reported difficulty in sanctions screening

The full report can be accessed at [link].