Financial Crime World

Forrester Report: The True Cost of Financial Crime Compliance in 2023

The financial services industry is once again preparing to confront financial crimes and maintain regulatory compliance. In its latest research, Forrester Consulting provides insights into the expenses, difficulties, and prospects in this essential domain for LexisNexis® Risk Solutions.

Key Insights from Forrester Research

The newly published report, “Forrester Research: True Cost of Financial Crime Compliance Study – Global Report,” reveals that financial institutions confront considerable challenges in preventing and detecting financial crimes while contending with escalating costs. The study, which surveyed finance executives at major financial firms in North America, Europe, and the Asia Pacific, offers vital perspectives on the current state of financial crime and compliance (Forrester Consulting, n.d.).

Financial Crime Compliance Costs

The study discovered the total expense of financial crime compliance across the three regions averaged $67.8 million. North America had the highest expenditure, with an average of $27.7 million, followed by Europe ($23.8 million) and the Asia Pacific region ($16.3 million).

Largest Spending Areas in Compliance

The largest investment in compliance activities was allocated to regulatory and reporting initiatives. These efforts cost an average of $15.3 million across all regions. The second-largest spending category was fraud and anti-money laundering activities, with an average of $13.3 million.

Financial Institutions to Boost Compliance Spending

The research also revealed a trend towards raising spending on financial crime compliance. In North America, 54% of financial institutions announced their intention to boost expenditures, with Europe following closely at 54%, and the Asia Pacific region at 44%.

Challenges in Regulatory Landscape and Fraud Techniques

Despite substantial investments, financial firms still face challenges in adapting to evolving regulatory requirements and sophisticated fraud techniques. The report advocates for technological advancements, such as Artificial Intelligence (AI) and Machine Learning (ML), to augment financial institutions’ proficiency in identifying and preventing fraud while reducing long-term costs.

Enhancing Compliance Programs

Paul Hickey, Vice President, Financial Crimes and Compliance for North America, LexisNexis Risk Solutions, emphasized the necessity for robust, adaptive, and agile compliance programs: “The financial crime landscape has become increasingly complex, and the consequences of non-compliance can be severe. Financial institutions need to build robust, dynamic, and agile compliance programs to mitigate risk effectively.”

Technological Solutions in Financial Crime Compliance

Forrester Research underscores the significance of technology solutions in aiding financial firms in managing financial crime and compliance challenges. The study’s insights will surely contribute to the collective endeavors to bolster the financial services sector and improve overall resilience against financial crimes.

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