UK financial services firms should spend more money on automating their compliance processes in order to avoid being overwhelmed by increasing regulation.
This is the conclusion of data services provider LexisNexis Risk Solutions following its survey into UK financial services firms and their anti-money laundering (AML) programs.
The survey found that the majority of compliance managers are calling for more regulatory support in order to implement the latest rules against money laundering. As many as 91% believe that more guidance from supervisors would make their AML procedures more effective and prevent delays.
However the report’s authors believe that firms should also "take a step back" and "consider the longer term benefits of automating their customer due diligence and investigations processes".
The UK’s fifth Anti-Money Laundering Directive (5MLD) rules came into force in January 2020, yet firms are only 60% through their implementation programs, according to the survey.
This delay is despite the belief among 60% of firms that the Financial Conduct Authority is likely to clamp down on non-compliance in the next six months.
The latest research, which canvassed 365 compliance professionals, comes on the back of another study, conducted by LexisNexis Risk Solutions and Oxford Economics in conjunction with the UK’s Cabinet Office, which found that firms were spending in excess of £28 billion (€32.2 billion) annually.
The majority of this spend is going on processes that could be more effectively streamlined by investing in automation rather than the 70% of budgets spent on recruitment and training.
According to Nina Kerkez, director of UK&I consulting at LexisNexis Risk Solutions, regulated firms are “united in being overwhelmed by increasing regulation and unanimous in their plea for more support”.
However, the majority of firms are effectively kicking the can down the road by adopting short term fixes and throwing money and resources at the issue rather than automating their compliance process.
“By committing to digitalising key components of their compliance processes, firms can drive down their annual compliance costs at the same time as streamlining customer onboarding and gaining a better understanding of the risk individuals pose," said Kerkez.
Kerkez’s comments have been echoed by others in relation to anti-money laundering compliance. A lack of automation and poor record keeping were cited as reasons for Luxembourg’s private markets sector is struggling to meet its AML compliance requirements.
In Funds Europe’s Luxembourg report, published in March, Paul Bratch, managing partner for financial services consulting firm, said there is less automation for AML processes but while there is no shortage of third party AML services available, they need to be more affordable to make inroads with many financial services sectors like private markets.
© 2021 funds europe