Australian financial services companies are expected to spend more than $3.6 billion collectively on financial crime compliance this year.
In a new study, LexisNexis Risk Solutions claim that the figure will be driven by “the increased compliance staff hiring and the complexity of preventing financial crime”.
A total of 50 decision makers in the Australian market were surveyed by the data and tech solutions provider between December 2021 and February 2022 which revealed that the exposure of local financial firms to financial crimes has increased in the past 18 to 24 months.
Around 80 per cent of those surveyed identified money laundering as the highest risk in their compliance operations, while two-thirds indicated they have increased compliance staff since 2010.
LexisNexis noted that the larger financial institutions that invested in technology solutions experienced “less severe impacts” on cost and compliance operations (almost $25 million per annum), while those that spent less than the industry average spent an average of $28.7 million.
An increase in the number of money mules and financial crimes involving digital payments has also attributed to rising compliance costs according to Lexis Nexis, with respondents reporting increased exposure to trade-based money laundering, third-party fraud, proceeds of trafficking and the criminal use of new technologies and methods, including cryptocurrency.
“Ecommerce and retail were ranked highest as being of most risk for money laundering by Australian financial institutions,” LexisNexis Risk Solutions vice president, David Haynes said.
“Amidst the growing regulatory pressures and evolving threats, retailers and ecommerce merchants should be prepared for increased costs brought by the digital transformation.”
The findings come after ASIC called on listed businesses to re-assess cyber risks and make a “long-term” commitment to cyber awareness.
Just over a month after the Federal Court found that local firm RI Advice breached its licence obligations by failing to have adequate risk management systems to manage its cyber security risks in a landmark ruling, Greg Yanco – executive director, Markets at ASIC – said businesses must be ready to respond to online threats.
“We encourage regulated entities to re-assess their cyber risks and ensure their detection, mitigation and response measures adequately address their risk appetite. They should also assess their preparedness to respond to cyber security incidents, and to review incident response and business continuity plans,” Mr Yanco said.
“ASIC is not seeking to prescribe technical standards or to provide expert guidance on cyber security. Where we consider a firm has not met its cyber risk management obligations, we may consider enforcement action to drive changes in behaviour.”
