1. Unbalanced fight
One of the biggest problems with fighting financial crime is that the introduction of new regulations has done little to address the issue. Financial institutions devote significant resources to managing compliance risk and adhering to guidelines instead of focusing on optimizing their capacity and resources to ensure better results.
Over 90% of AML alerts are false positives. - McKinsey 2018
Criminals have become even more sophisticated in their actions. They take advantage of the regulatory loopholes and use the newest technologies which make it nearly impossible to keep up with them.
1% of cases are prosecuted and 1% of criminal proceeds is confiscated by authorities. - European Banking Federation (EBF)
Financial institutions don't have the right tools to sufficiently detect and manage suspicious behaviour, and then to subsequently manage and submit the case for further authorities investigation.
63% of FIs cite data inconsistency and diversity of sources as their main challenge. - KU leuven - Belgium university of Southampton - UK
Compliance officers’ job consists of checking and rechecking alerts, with almost all of them proving to be irrelevant. The unsatisfactory results of overstretched compliance departments and FIUs are far from what is needed to eliminate money laundering and terrorism funding activities.
10% of banks' staff are compliance roles. - European Banking Federation (EBF)
5. Cost of compliance
The costs of not solving the problem of expensive and largely ineffective AML transactional reporting are considerable and wide-ranging. In addition to financial institutions failing to prevent money laundering and other financial crimes, they also see a double-digit increase in compliance costs, a higher possibility of getting millions in fines, and loss of reputation.
€100 billion spent on compliance annually by financial institutions. - European Banking Federation (EBF)
Technology and innovation are aiding fintech in their journey to streamline compliance processes and successfully combat financial crime. These advancements are to help financial institutions not only adhere to regulations but also to achieve their business ambitions.