LexisNexis: 2022 Key Trends Shaping the Financial Crime Compliance Landscape

i-aml LexisNexis 2022 Key Trends Shaping the Financial Crime Compliance Landscape n

In 2021, the Pandora Papers highlighted the use of offshore jurisdictions and shell companies to hide potentially unethical or criminal behavior. However, financial institutions that allocated a larger share (>=50%) of financial crime compliance costs to technology experienced a smaller YoY compliance cost increase and fewer pandemic-related challenges.

In 2022 and beyond, financial institutions may shi towards greater investment in technology, rather than exponentially increasing labor, to automate manual processes and save on overall compliance costs.

Journalists leaked revealing hidden wealth, tax avoidance and, in some cases, money laundering by some of the world’s rich and powerful.

The Pandora Papers underlined the poor regulation of many designated non-financial businesses and professions (DNFBPs) such as legal professionals, trust and company service providers and real estate companies. Recent FATF evaluations have also highlighted regulation of DNFBPs as a deficiency in many countries. Regulatory scrutiny of DNFBPs and their approach to financial crime compliance is likely to increase throughout 2022, as part of efforts to improve global financial transparency.

The use of cryptocurrencies has boomed, fuelling concern over crypto-related financial crime from FATF and other regulatory bodies. Financial crime compliance costs have increased year-over-year, largely driven by labor. Meanwhile the “Great Resignation” trend of 2021 has caused some concern over a compliance skills gap within financial institutions.




The crypto ecosystem will face increasing regulatory scrutiny in efforts to prevent illicit activity and ensure financial crime controls such as sanctions are adhered to. FATF, the international standard-setter for anti-financial crime regulations, is leading the way in defining AML/CFT standards. FATF recently published detailed guidance on the matter that will undoubtedly guide the development of national regulations throughout 2022 and beyond. Banks are ramping up preparations for ISO 20022 which aims to be the next model for payments data across the globe.

The urgency to implement a new global standard has increased over the past few years due to the emergence of new payment methods from challenger banks, payment service providers (PSPs) and other disrupters, with the goal of achieving a fast and seamless experience for end users. Crypto storage apps were downloaded in January of 2021, making up 31.07% of all downloads made in 2020 2021 saw the highest ever reported ransom for universal decryption keys as the U.S. government set its sights on combating ransomware.

Although transitioning operations will require tremendous effort in the short term, financial institutions can expect the adoption of ISO 20022, a new common standard for payments messaging, to not only increase the speed of payments, but also reduce costs for compliance teams. The richer, more detailed information in messages will improve sanctions screening through targeted matching and help organizations detect and prevent financial crime.

Financial institutions have been experimenting with AI over the past few years to streamline and optimize financial crime compliance processes and realize efficiencies. 2021 saw examples of environmental, social and governance (ESG) objectives converging with AML practices across supply chains.

The banking sector saw the greatest satisfaction with their use of AI in comparison to other industries, with 20% of executives citing that AI impacts their industry “very positively” 13 With Germany following France’s example by establishing a due diligence framework that addresses human rights violations and environmental degradation in global value chains, other countries around the world should expect to follow suit over the next few years.

In June 2021, Germany adopted its new Supply Chain Act, “Lieferkettengesetz,” that mandates human rights due diligence in supply chains. The Supply Chain Act will not only have a strong impact on businesses in Germany, but also around the world. Foreign subsidiaries of German companies will count as a business area of the German company and thus must comply with the due diligence obligations outlined in the law. SWIFT will enable ISO 2022 messages for cross-border payments and cash reporting businesses starting Covid-19 put significant pressure on banks to adopt cloud technology with the shi towards remote working and skyrocketing customer demand for online services, accelerating financial institutions’ digital transformation.

The use of AI and its subsets (such as advanced analytics, natural language processing and robotic process automation) will continue to drive efficiency in parts of financial crime  compliance, such as the automation of the first level review process. This will allow human workers to focus on higher value tasks such as investigating true matches.

In 2022 and beyond, we can expect to see more companies move their operations to the cloud, including their financial crime screening operations, to take advantage of the superior performance, security and analytics capabilities this infrastructure offers.

In 2020, 83% of surveyed financial services companies reported deploying cloud technology as part of their primary computing infrastructures. There was a strong positive perception of the potential for cloud technology to assist in business operations and regulatory compliance among >88% of survey respondents in financial services sector.

The world of financial crime compliance is ever evolving. From the ongoing effects of the pandemic to the rising cost of compliance and the introduction of new technology, standards and regulations, navigating this landscape has never been more complex. Here, we identify eight emerging trends that are shaping how our industry addresses the wide range of threats facing the global financial ecosystem.


July 14, 2022 Published by LexisNexis.  Download full pdf Report

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