The Australian financial services industry is expected to spend more than US$2.54 billion (AU$3.68 billion) on financial crime compliance this year due to increased staff hiring and the rising complexity of financial crime prevention.
LexisNexis Risk Solutions’s survey of 50 Australian bank, investment, asset management and insurance firm decisionmakers between December 2021 and February 2022, found the exposure of Australian financial firms to financial crimes had increased in the past 18 to 24 months.
More than two-thirds of financial institutions surveyed indicated they had increased compliance staff since 2019.
Labor and training accounted for 54% of average compliance costs while technology, including adding or maintaining networking or systems that support remote working during the pandemic, accounted for 41% of costs.
The findings also showed 80% of Australian compliance professionals in financial firms believed money laundering was the highest risk within their compliance operations.
David Haynes, vice president at Lexis Nexis Risk Solutions, said: “E-commerce and retail were ranked highest as being of most risk for money laundering by Australian financial institutions.”
Money mules and financial crimes involving digital payments had also increased and contributed largely to rising financial crime compliance costs.
Respondents indicated that third party professional service providers, such as accountants and lawyers, played a role in facilitating money mules to launder proceeds of predicate crimes.
Investment in technology to support financial crime compliance was effective according to the report, as those large financial institutions that did so had less severe impacts on cost and compliance operations (spending almost $25 million each year), greater efficiencies and fewer pandemic-related challenges. Those that spent less than the industry average on technology spent an average of AU$28.7 million on annual financial crime compliance costs.