The survey of 300 financial crime decision makers working in the financial services sector in the UK, also found that on average, organisations spent £53 annually on financial crime defence for each customer relationship they have. Moreover, they refused an average of £90,240.77 and exited an average of £90,869.52 worth of UK customer relationships for financial crime reasons during the last 12 months.
Andrew Jacobs, head of regulatory consulting at DWF, said: "Responses to the survey indicated that firms with a revenue of around £10m per year are likely to spend in the region of 1.72% of total revenue on financial crime prevention and deterrence. Larger firms are typically spending less than 1% of total revenue to fight financial crime, particularly those with l revenue of £50m or greater. As a cross-section of the Financial Services sector, this tells us that proportionately, smaller firms are spending a greater share of their turnover on financial crime prevention.
"Conversely, firms with greater revenue (£10M plus) are clearly spending most of their financial crime spend on human resources, with over 32% of annual spend being on Financial Crime roles, compared to those firms with a turnover up to £500,000 for whom Financial Crime roles never exceeds 27% of total annual financial crime prevention spend. This figure and our wider analysis shows us that Human Resources continue to be one of the most effective ways of detecting human behaviour linked to Financial Crime activity.
"In a climate where businesses are being held to account on their Environmental, Social and Governance approach by investors, clients, employees and society more broadly, it is important for financial services business to make sure that they are considering evolving parameters, so that governance is robust and their control framework remains alive to new risks."
The financial crime decision makers cited that employee resources in financial crime roles cost their firms an average of £180,000 per year. At the end of their respective reporting periods, respondents said there were an average of nine full-time employed UK staff within their firm performing financial crime roles, spending an average of 46 hours of employee time per week monitoring transaction alerts and reviewing screening alerts. Analysis also showed that every additional 10 hours spent weekly on monitoring transactions and reviewing alerts, result in an additional 1.5 Suspicious Activity Reports (SARs) raised internally.
Technology is key to increasing financial crime detection and prevention – but it is also a significant factor in driving up costs and staff workload. Respondents highlighted that over the last 12 months, £76,000 was spent on financial crime prevention technology, per firm. They also stated that they expect their firms will spend around £800,000 on crime prevention technology in the next five years. Technology usage is widespread – with 82% of firms using an automated system to screen clients and 84% employing transaction-monitoring software for Anti-Money laundering (AML) and sanctions detection.
"Just as dedicating more staff to financial crime boosts results, so too does the use of technology. However, our analysis has found that this technology usage does not necessarily improve efficiency. In fact, organisations that use automated systems spend more time reviewing alerts – for every 1,000 customer relationships, they will spend around an additional 49 hours per week monitoring transactions and reviewing screening alerts compared to firms that don’t utilise automation. The statistics tell us that because technology generates more alerts and highlights more potential risks, it also requires more time on follow-up investigatory work, but exactly how much is created is dependent on whether firms have correctly calibrated their systems. There is the real danger that poorly aligned alert systems simply create a cottage industry within a firm," said Jacobs.
Bev Robertson, Chief Operating Officer of Association of Professional Compliance Consultants, added: "This research provides a great snapshot into the deployment and engagement of firms. It not only highlights the costs and resources involved, but also looks at the challenges of balancing elements such as the use of technology versus manual screening in identifying and subsequently reporting on suspected financial crime – it highlights the variances across sectors and indeed around the global world of financial services. It also provides some thought-provoking ‘not to be ignored’ takeaways that firms should definitely be considering when evaluating their own financial crime prevention programs."
* Financial crimes - Fraud, Market Abuse, Anti-Bribery & Corruption (Bribery), Sanctions and Anti-Money laundering (AML).