Germany at the top: Combating financial crimes is becoming more and more expensive

Financial crimes are extremely lucrative.

Not least because they pay off immediately if they are successful.

Whether money laundering, terrorist financing or just fraud, corruption or insider trading on the stock exchange.

It is an enormous cost for financial companies to prevent these crimes.

The data service provider LexisNexis Risk Solutions has now put the total annual costs in a study for Europe, Africa and the Middle East at 117.5 billion dollars per year. Based on a survey of experts, the business effects of regulatory changes in the environment were also examined in connection with the corona pandemic. The costs have increased immensely compared to the previous year, according to LexisNexis by 21 percent. In Germany, the increase of 20.2 percent to 57.1 billion US dollars is roughly average. This corresponds to an above-average share of the total costs of the region, says the responsible director Nina Kerkez. In France, spending is not even half that high.

The reasons for the increase in costs are not only due to the tightened regulations of the 6th EU Money Laundering Directive. Money launderers are also increasingly using virtual currencies, preferably those with increased anonymity that have been developed specifically for this purpose. The pandemic has also given rise to an upward trend in phone fraud, malicious domains, malware, ransomware and phishing, which involve stealing money or personal information that is then used to carry out financial crimes. Financial institutions should expect an increase in financial crime, at least in the foreseeable future. 70 percent of the companies expected that the pandemic will result in further expenditure in this area in the next 12 to 24 months, of which more than two thirds will be attributable to technology.

In the longer term, this ensures lower costs. Companies that spend more than half their budget on technology have comparatively lower average annual costs than companies that spend more money on employees. These firms also benefited from a smaller negative impact in acquiring new customers.