1 See next page for full Oxford Economics methodology
2 https://nationalcrimeagency.gov.uk/who-we-are/publications/296-national-strategic-assessment-of-serious-organised-crime-2019/file
3 https://www.ukpublicspending.co.uk/uk_defence_ spending_30.html
4 For larger FIs with over £100bn AUM, the ratio of reported AML cost to AUM was 0.19, whereas for FIs with AUM from £500m to £1bn, this ratio shoots up to 1.58. For the smaller FIs (AUM less than £100m) the ratio is higher still, at 2.12.
5 LexisNexis® Risk Solutions 5MLD research – average cost to implement 5MLD = £777k
6 LexisNexis® Risk Solutions Sanctions and Alert Remediation report 2017
7 LexisNexis® Risk Solutions Future Financial Crime Risks report
Research carried out Oct Dec 2020, commissioned by LexisNexis Risk Solutions and executed by Oxford Economics.
Telephone survey of 301 UK based financial services organisations (FSOs), including Retail banks, Challenger banks, Wholesale/Commercial banks, Investment banks/securities firms and money services businesses.
Interviews with MLROs, or others with oversight of compliance activity across their UK operations.
Objectives of the research:
Estimate the cost of AML compliance
Analyse the trends in costs, and potential factors influencing cost behaviour
Evaluate FSO’s progress in implementing AML compliance best practices, and the impact of the pandemic on AML operations.
Identify potential actions, for FSOs themselves and regulators, to improve AML compliance efficiency and effectiveness
1. Surveyed 300 senior compliance officers across four key institution types to collect their estimates of the full cost of compliance, including people-related costs, technology and other administration costs, across their organisations (i.e. across all steps of the compliance processes from customer onboarding to exiting, in compliance functions and lines of business).
2. Calculated the median cost of compliance, to ensure our calculations were not distorted by outliers in the respondent sample. This results in a significantly lower, though more reliable estimate of the cost of compliance than using the mean.
3. Scaled the cost across the UK Financial Services sector using ONS statistics on the number of businesses in relevant sectors for different revenue bands. This arrives at an estimate of the total cost of compliance of £28.7 billion.
In some respects, this is a conservative estimate of the full costs of compliance of UK Financial Services, as some costs are not in scope of the calculation. For example we only scaled up for the institution types covered by the survey: retail banks, wholesale/commercial banks, Investment banks/securities firms and money services businesses, so are excluding other FS institutions that will have compliance costs, such as insurance companies and wealth managers. In addition, we excluded small institutions with annual revenues of less than £5 million. Although there are a large number of these small firms, they only represent 3% of industry costs.
