Preventing financial crime costs banks and other Financial Services companies an average of £374,000 a year. That’s according to a survey of 300 sector decision-makers by legal and business services consultants DWF.
Eighteen percent of that spend goes on anti-money-laundering (AML) initiatives, followed by combating fraud (17 percent) and market abuse (15 percent), with sanctioned regimes costing an average of 16 percent.
Costs relating to attempted bribery increase as annual revenue increases, adds the 24-page report.
DWF found that smaller companies spend a greater share of revenues on preventing financial crime than larger ones. On average, firms with revenue of around £10 million a year spend 1.72 percent of it on prevention and deterrence, while larger ones typically spend less than one percent, particularly when revenues exceed £50 million.
“Overall, the burden of financial crime prevention costs is being most acutely felt by smaller firms, or those firms with a lower annual turnover,” says the report.
Specialist crime-prevention teams cost their firms an average of just under £180,000 a year. However, the survey also found that there are an average of just over nine full-time staff in these roles, suggesting that many of them are low paid.
According to DWF’s findings, an employee spends an average of 46 hours a week monitoring transaction and screening alerts. For every additional 10 hours a week spent on this, an additional 1.5 suspicious activity reports (SARs) are filed internally.
Technology is key to increasing financial crime detection and prevention. Eighty-two percent of firms use an automated system to screen clients, while 84 percent employ transaction monitoring software for AML and sanctions detection.
Organisations using automated systems typically disclose more SARs to the National Crime Agency (NCA), identify more Politically Exposed Persons (PEPs) and high-risk customers, and remove more of them.
However, automation is a significant factor in driving up, rather than reducing, costs and staff workloads, found the survey. This is because it generates more alerts and highlights more potential risks, leading to follow-up investigations.
The average spend on financial crime prevention technology over the last 12 months was £76,300. However, decision-makers expect that their firms will spend an average of £805,127 on prevention technologies in the next five years.
The Investment and Wealth Management sub-sector believes it will spend over £1.6 million per firm on crime prevention technology by 2026, significantly more than the major banks, which anticipate spending less than £1 million apiece.
Key questions need answering when it comes to combating financial crime, says DWF. These include:
- What is your firm’s overall return on investment when it comes to spending on financial crime prevention?
- Are staff resources being effectively targeted at the highest-risk areas?
- What activities do staff spend most of their working week doing and what are the benefits?
- Is technology producing the results you expected? Are there too many false positives?
- Where no technology is used, are manual processes providing adequate defence/protection?
- Which financial crime typology presents the greatest threat to your sector? And what are your peers doing in response?
- Does your financial crime data tell the story you expect, particularly when benchmarking against your peers?
All firms need to demonstrate clear responsibility in preventing financial crime, concludes the report, which you can read in full here.