AML/CFT – The potential costs of non-compliance

The need for AML compliance / transaction monitoring solutions, at face value, can be considered a necessary requirement, or expense, induced by regulators. However, one can also analyze the introduction of these solutions from the perspective of possible cost savings.

The first, and possibly obvious, cost saving is the avoidance of fines. This aspect is accentuated by the hefty fines that on ongoing basis we have witnessed on public media. To quantify such incidents, one can mention recent fines that were handed to Goldman Sachs (US$7.2 billion – 1MDB (aggregating 3 fines)); 2) JP Morgan (US$2.6 billion – Madoff), 3) HSBC (US$1.6 billion – Mexican/US ML)*, and many others. The drive towards increased credibility by regulators is stepping up the enforcement of AML/CFT regulations and hence this potential material cost is something that operators or financial institutions cannot disregard.

A direct consequence of this cost is the reputation cost. Driven by the general global drive towards better governance, news about penalties handed out by regulators are becoming more attractive for publishing by media houses. This can seriously damage the reputation of the involved organisation at the benefit of direct competition.

Another cost that is linked with AML compliance is that of the human man power required to operate the required compliance processes. Monitoring and sifting through voluminous transactions (semi/) manually is a daunting task, typically requiring the man power of a substantially sized pool of human resources. In addition, the investigation of suspicious transactions or clients is a process that typically can take weeks if not more. An automated solution that can filter down the number of transactions that need to be monitored, based on the likelihood of actually being suspicious transactions, can help a lot to reduce the effort involved. In addition, a solution to help with the investigative cases and to coordinate the work across the AML team can help to streamline the processes and reduce the number of human resources required.

*Cusack, J.,2022. Financial Crime Bank Fines in the 21st Century – by FCN – Financial Crime News. [online] Financial Crime News. Available at: <> [Accessed 15 September 2022].

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