LONDON—Smaller banks are spending up to five times as much on compliance, on a proportional basis, as larger firms, according to new data.
The new study from U.S. database firm LexisNexis, which focused on lenders in the U.K., found that in 2023, for those with over £49 million of assets under management, companies spent typically 0.43% of their revenue on compliance per year, AML Intelligence stated in its analysis.
However, for smaller financial institutions with less than £49 million, the typical spend was 2.3% of revenue.
“Whilst it’s true that the average annual financial crime compliance (FCC) cost burden continues to be significantly lower for smaller firms, nevertheless it remains significantly higher when measured as a cost-to-revenue ratio,” the report found.
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In fact, smaller firms’ FCC costs were calculated to be five times higher, as a proportion of revenue, than those of their larger counterparts in 2023, AM Intelligence said.
As part of the study, LexisNexis said it surveyed 254 U.K. banks and fintechs in partnership with Oxford Economics.
The report also found that the cost of compliance has been steadily rising on an annual basis. U.K. financial institutions spent a combined total of £28.7 billion on FCC in 2021, rising to £34.2 billion in 2022 and then £38.3 billion by 2023, AML Intelligence said.