New Report Reveals Evolving Financial Crime Risks in

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61% of banking and financial services professionals say there is enough or too much regulation, but inadequate enforcement
In light of the increased personal liabilities, 54% of compliance professionals would choose another career path if they had the opportunity

Evolving criminal methodologies are currently the single biggest financial crime risk, according to 42% of banking and financial services professionals

LexisNexis® Risk Solutions, a global big data, technology and analytic linking company, has today released its Future Financial Crime Risks report that it has produced with support from the British Bankers Association (BBA). The report provides a review of financial crime and its evolving risks. A greater regulatory burden, increased personal liabilities on compliance professionals, barriers to greater collaboration and evolving criminal methodologies were identified as the most significant barriers to banks’ ability to combat financial crime.

The report reveals that while some of Britain’s major banks are spending as much as £660m ($1bn*) each year on AML compliance, both banks and law enforcement agencies express concerns over the changing face of financial crime, and their ability to effectively combat emerging risks. The regulatory landscape is ever expanding and increasing in complexity, with regulations themselves becoming ever more difficult, and expensive, to administer.

As one bank professional commented: “Costs are just a symptom of a culture of compliance for compliance’s sake,” with another agreeing that the system is no longer focused on providing information to help catch criminals.

Doubts were also revealed over the effectiveness of the Fourth EU AML Directive. Almost a third (32%) of respondents say that the Fourth EU AML Directive will have no effect – or could even increase levels – of money laundering across Europe, while 47% predict it will decrease it “somewhat”. Fewer than one in five (17%) expect the Directive to have a dramatic effect.

The report also highlighted concerns about a shortage of AML compliance professionals in the UK. Increasing levels of personal liability are expected to exacerbate this gap, as half (50%) of compliance professionals said the Senior Managers Regime would make their jobs more or a lot more stressful and an even greater number (54%) said if they had the opportunity they would choose another career path in light of the increased personal liabilities.

A need for greater collaboration among banks, law enforcement agencies and regulators, as well as within banks themselves was also highlighted. Alongside continuing mistrust towards banks, data protection regulations were found to restrict the ability of organisations to share information, deterring collaboration.

When looking at future risks, the report found that 44% of banking and financial services professionals say evolving criminal methodologies will be the biggest single emerging financial crime risk to their business in the next year, followed by a lack of personnel in their risk function (13%). What’s more, over the next two years, preventing cybercrime will be the single biggest area of investment for more than a third (37%) of respondents, with the next two most common answers being fraud (23%) and AML (20%). The expansion of online and mobile banking (and particularly virtual currencies) were revealed to be the most significant challenges banks are set to face in the future when fighting financial crime.

Chrisol Correia, Director, Global AML Compliance, LexisNexis Risk Solutions said:

“British banks are on the front line in the battle against financial crime. Both the nature of their business and regulatory design has positioned them as the first line of defence against money laundering, terrorism funding, and an expanding array of other illicit activities.

“Speaking to those who dedicate their careers to tackling financial crime reveals genuine fears about the ability of banks to continue to perform this function in the future, however.

“This report makes it clear that financial crime cannot be eradicated through strategic investment alone. Efforts to combat money laundering that are based on limited understanding and knowledge of the industry and risks will exacerbate the problem in the future. To combat financial crime, banks and law enforcement must work together to understand the future risks to adopt a proactive, rather than a reactive approach. If we can understand the risks of the future, we can perhaps prevent them from materialising.”

Matt Allen, Financial Crime Director, British Bankers’ Association said:

“The BBA has been pleased to support LexisNexis Risk Solutions to develop this report that brings together the views of experts from banking and law enforcement. The report quite rightly emphasises the efforts that the banking industry is taking to address financial crime but also the changing nature of the risks in this area. There is clearly a need for an even more intensive collaboration to respond proactively to these challenges and the report provides a useful basis for consideration of how we can optimise our efforts.”