Financial Crime World

Financial Crimes on the Rise in Latin America: Compliance Costs Top $15 Billion

A Staggering Expense for Financial Institutions

A new study by LexisNexis Risk Solutions has revealed that financial crime compliance costs have skyrocketed for 97% of financial institutions in Latin America, reaching a staggering U.S.$15 billion. The True Cost of Financial Crime Compliance Study – Latin America, conducted by Forrester Consulting, highlights the significant challenges faced by financial institutions in the region as they grapple with an increasingly complex regulatory landscape and sophisticated cybercrime.

Key Challenges Faced by Financial Institutions

  • Technology costs are driving increases in expenses for financial institutions, with 69% of organizations noting rises in technology costs related to networks, systems, and remote work.
  • Cryptocurrencies, digital payments, and artificial intelligence are emerging as tools for illicit activities, posing a significant threat to financial institutions.

Striking a Balance Between Compliance Effectiveness and Customer Experience

The report emphasizes the need for financial institutions to strike a balance between compliance effectiveness and customer experience. With 39% of organizations citing the escalation of financial crime regulations and regulatory expectations as the primary factor driving increases in compliance costs, it is essential that institutions adopt cost-cutting measures while improving efficiency.

Recommendations to Combat Financial Crime

To combat financial crime, the study recommends that financial institutions:

  • Emphasize streamlining KYC (Know Your Customer) and onboarding processes to reduce false positives and allow legitimate transactions to proceed without inconveniencing customers.
  • Leverage advanced technologies such as Artificial Intelligence and Machine Learning-based compliance models to counter emerging financial crimes.
  • Partner with experienced technology providers to alleviate labor costs and enhance compliance efficiency.

A Call to Action for Financial Institutions

The study, which compiled responses from 268 senior decision-makers responsible for financial crime compliance at financial institutions in the LATAM region, highlights key pain points related to the cost, current state, and challenges presented by financial crime compliance operations.

In a statement, Matt Michaud, Global Head of Financial Crime Compliance at LexisNexis Risk Solutions, noted that “the cost of financial crime compliance is clearly rising for financial institutions across Latin America, which is being felt by teams across the compliance workflow.” He emphasized the need for businesses to actively seek ways to reduce labor costs while improving compliance efficiency.

Conclusion

The study’s findings underscore the critical importance of effective financial crime compliance in the LATAM region. With financial crimes on the rise and compliance costs soaring, it is essential that financial institutions prioritize this issue and adopt strategies to mitigate its impact.