Financial Institutions Brace for Mounting AML Compliance Costs
European financial institutions are facing substantial financial burdens as they prepare to comply with impending Anti-Money-Laundering (AML) legislation, as outlined in Fintech Global News. According to research conducted by Eastnets, a prominent compliance and payments expert, each financial institution in Europe could potentially bear compliance costs of up to £1 million.
The European Commission is gearing up to introduce the Anti-Money-Laundering Authority (AMLA) to tackle money laundering and terrorism financing, and the industry is feeling the squeeze. Eastnets conducted a comprehensive survey involving more than 3,000 IT, risk, and compliance leaders within the financial sector. The survey results revealed a stark reality, with 76% of UK respondents foreseeing that failing to adapt to the new AML legislation could set their businesses back between £350,000 and £1 million. Similarly, 72% of respondents from the European Union anticipated a similar fiscal impact, estimating compliance costs between €360,000 and €1 million.
The impending financial strain on institutions is poised to stem largely from penalties, seizures, and the need for an extensive increase in training, monitoring, and reporting procedures, as indicated by 97% of survey participants. An overwhelming 88% of respondents noted the uphill battle against financial fraud and money laundering, which has grown increasingly complex and financially taxing over the past five years. Approximately 38% attributed this to heightened regulatory expectations.
Financial institutions expressed significant apprehension in light of the survey findings, with 46% identifying the rapidly evolving regulatory environment as one of their foremost challenges concerning AML and financial fraud. Additionally, 45% highlighted the complexity of regulations and legislation as a major concern.
In preparing to navigate this challenging landscape, financial institutions are turning to technology and tools as indispensable assets for compliance readiness and cooperation with entities like AMLA. A substantial 63% of respondents emphasized the importance of regulatory reporting tools, 59% pointed towards third-party data providers, and 55% recognized Artificial Intelligence (AI) as a crucial component of their compliance strategies.
Deya Innab, Deputy CEO of Eastnets, commented on the situation, stating, «Keeping up with new regulations is an age-old challenge for financial institutions, but the formation of AMLA could bring eye-watering costs. To minimize this, businesses need to consider all the technologies and tools available to them. By doing so, they can minimize costs in the long term while protecting themselves and their customers.»
This research underscores the urgency for financial institutions to proactively address the impending AML legislation and invest in the necessary resources and technology to ensure compliance while mitigating the potentially staggering financial burdens that lie ahead.