牛津经济研究院-降低反洗钱合规成本（英）-2021_38页_7mb

Summary of AML Compliance Cost Report

Core Content

This report explores the rising costs of Anti-Money Laundering (AML) compliance in the UK financial sector. It highlights that AML compliance is becoming increasingly expensive and time-consuming, driven by regulatory complexity, the volume of AML activity, and the inefficiencies in current compliance processes. The findings are based on research with over 300 UK financial institutions and in-depth interviews, indicating a growing need to shift compliance spending from people to technology.

Main Points

• AML Compliance Costs in the UK:
  The annual cost of AML compliance for UK financial institutions is estimated at £28.7 billion, expected to rise to over £30 billion by 2023.

  • Average annual AML compliance cost per firm is £186.5 million, with larger institutions spending closer to £300 million.
  • Costs are rising faster than business inflation, with a projected increase of nearly 10% over the next three years.
  • Compliance costs are more burdensome for smaller firms due to lack of economies of scale.

• Regulatory Drivers:

  • Regulations, not criminal threats, are the main cause of increased AML compliance costs.
  • The complexity and frequency of regulatory updates make it hard for firms to keep up.
  • Brexit is expected to increase regulatory complexity, as the UK now has to manage EU, US, and UK sanctions regimes separately.

• Internal Drivers:

  • Growth in AML activity is a key internal driver of increased costs.
  • Business growth, especially in customer acquisition, leads to more AML checks and investigations.
  • Increased emphasis on 'Know Your Customer' (KYC) and Enhanced Due Diligence (EDD) has driven more rigorous checks and higher costs.

• Cost Breakdown:

  • Over half of AML compliance budgets are spent on Customer Due Diligence (CDD), which is the most costly and time-consuming process.
  • Screening and ongoing monitoring account for a fifth of overall AML compliance spend.
  • Alert remediation, investigations, and evidence gathering make up another fifth of the cost.

• Operational Challenges:

  • False positives are a major issue, with over 90% of alerts being false.
  • Compliance teams spend less than 10% of their time on Suspicious Activity Reports (SARs), but the culture of over-cautiousness leads to over-reporting.
  • Data quality and legacy systems are significant pain points, contributing to inefficiencies and unnecessary costs.

• Technology vs. People:

  • AML compliance spend is heavily skewed towards people-related costs (70%), with only 25% allocated to technology.
  • Over-reliance on people makes firms vulnerable to staff attrition and human error.
  • There is a growing recognition that investing in technology can improve efficiency and reduce costs, especially for smaller institutions.

• Call to Action:

  • There is a clear trend towards using technology and data to improve AML processes.
  • Firms are increasingly prioritizing data management, technological investment, and the potential return on investment.
  • The report suggests that a shift in compliance spend towards technology could help reduce costs and improve the effectiveness of AML controls.

Key Information

• Total AML Compliance Cost: £28.7 billion annually, expected to rise to over £30 billion by 2023.
• Regulatory Impact: Regulatory complexity and fear of penalties are the primary external drivers of cost increase.
• CDD Dominance: CDD accounts for 53% of AML compliance costs and is the most time-consuming process.
• False Positives: Over 90% of alerts are false positives, leading to significant waste in time and resources.
• Staff Training: Almost 15% of AML compliance budgets are spent on staff training, which is often focused on compliance rules rather than emerging threats.
• Technology Adoption: Technology is increasingly seen as a solution, with a strong ROI reported by many firms, especially challengers and smaller institutions.
• Data Management: Improving data quality and integrating systems is critical for reducing costs and increasing the effectiveness of AML processes.

Conclusion

The report concludes that while AML compliance is essential, the current model of heavy reliance on people is unsustainable. A strategic shift towards technology and data management is needed to reduce costs, improve efficiency, and better combat financial crime.