UK compliance costs have soared to £21,400 per hour as firms across sectors are spending more than ever to fight financial crime. This spending has risen by a third since 2021, bringing the total annual cost of compliance to a staggering £38.4 billion. This amount is roughly three-quarters of the UK government’s defence spending.
However, a closer look reveals a more nuanced picture. Increases in firm-level financial crime compliance (FCC) costs were mainly driven by investments in technology, growing at more than twice the rate of employee-related or other costs. For the first time, technology-related roles account for over half (52.4%) of all FCC recruitment and training costs, up from a third (34.1%) since 2022. This shift reflects firms’ efforts to build teams of technologists capable of operating the technology and interpreting its outputs.
This trend is evident in the levels of automation now seen across the customer due diligence (CDD) workflow. By 2024, all CDD processes are at least two-thirds automated, with an average automation level of 80%, and the most significant increase observed in internal investigations. This marks a significant change from just two years ago when the FCA warned firms about a systemic over-reliance on labour-intensive manual processes and spreadsheets.
Despite over half (52%) of firms reporting an increase in customer numbers in 2023, leading to a significant rise in onboarding activity, there was a 7% drop in KYC and IDV process costs as a share of overall FCC costs over the same period. This suggests that automation is delivering process efficiency gains at the most volume-intensive end of the CDD journey, with similar benefits realised elsewhere in the process.
Looking ahead, there’s little indication of a decline in the appetite for technology adoption in the near term. Firms are focusing on advanced analytics and AI, with 40% already having implemented tools and another 58% planning to do so within three years. Further data improvements are also anticipated.
In an era of increasing regulatory demands and sophisticated financial crimes, investing in compliance technology is not just a strategic advantage but a necessity. Banks and law firms that embrace these technologies now will be better positioned to manage risks, reduce costs, and ensure long-term compliance, ultimately securing their future in a highly competitive and regulated market.
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