The Cost of Compliance 2023 Report from Lexis Nexis suggests that financial institutions are spending heavily on Financial Crime Compliance (FCC) – with costs expected to further increase within the next three years.

The report finds that the total compliance costs for UK financial services is estimated to be £34.2 billion – an increase of 19% in two years, with the total cost equivalent to almost three quarters of the UK’s defence budget for 2021/22 (£45.9 billion according to government statistics). FCC costs also remain 13% higher than they were two years ago.

The average cost of FCC per firm is estimated to be £194.6 million. However, the impact of these costs are not felt evenly across all firms, with smaller firms and certain sectors absorbing a higher impact on their margins. Respondents to the survey also said that they expect compliance costs to further increase by around 8% within the next three years.

Increasing regulation is cited as the greatest external driver of cost, with Customer Due Diligence (CDD) processes remaining the largest single operational cost, accounting for 67% of total FCC costs in 2022, an increase from 53% in 2020. The greatest share is represented by Know Your Customer (KYC) onboarding checks.

The report – compiled from responses of 300 financial services professionals from different size firms and institutions across the financial services sector – also asserts that two-thirds of respondents believe the UK financial sector is only ‘somewhat effective’, with 28% believing it is ‘very effective’ at detecting and preventing financial crime. Around one in six respondents disagreed with this sentiment, believing the UK financial sector’s collective efforts to fight financial crime is ‘ineffective’.

57% described their own organisation’s response to financial crime as ‘effective’. A third of those surveyed rated the effectiveness of their organisation’s response as ‘average’, while around one in seven went as far as rating it ‘ineffective’.

The report suggests that the ‘principal focus for many firms has been on getting the right training in place for staff and investing in data improvement’. ‘Increasing the amount and quality of staff training’ is the most commonly implemented improvement to date, with 45% of firms stating they have focused on improving this area.

When participants were asked what FCC enhancements they were expecting to make in the future, 41% said they were looking to invest in data quality initiatives in the next year, 33% said they intent to increase staff training and/or quality, and around 50% cited they were looking to ‘adopt/increase the use of new technology’.

In summary, the report noted:

“Many of the drivers of this growing financial and operational burden are outside of firms’ direct control; increasing regulation, an evolving criminal threat, and the increasing cost of doing business, among them. However, the survey points to many areas where management action can be taken to reduce costs and increase the effectiveness of UK firms’ compliance activities.


Many firms have invested, or are planning to invest, in improvements to their financial crime compliance processes. Automation of customer due diligence processes is a key area, as is staff training. These enhancements are expected to deliver improved compliance, as well as other tangible business benefits, including better financial crime detection rates. The survey indicates plenty of scope to improve financial crime compliance, both at an overarching and granular level.


Given the huge costs being cited, even marginal efficiency improvements could amount to significant cost savings over time, with significant potential for improved competitive advantage and business performance.”

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