Menu
Banking Exchange Magazine Logo
Menu

The Cost of AML Compliance for US Banks

New data shows the impact of anti-money laundering and BSA compliance on banks’ balance sheets

  • |
  • Written by  Banking Exchange staff
  • |
  • Comments:   DISQUS_COMMENTS
The Cost of AML Compliance for US Banks

US banks spent between 0.4% and 2.4% of their total 2018 operating expenses on anti-money laundering and Bank Secrecy Act compliance, according to a new study from the Government Accountability Office (GAO).

The GAO assessed a sample of banks of varying sizes and how much they spent on compliance with anti-money laundering (AML) rules and the Bank Secrecy Act (BSA).

Banks in the GAO’s study spent an average of $15 per new account on due diligence requirements – although the actual cost ranged from $5 to $44 depending on where banks were based and where their customers were.

The largest banks on the study – which were not named – spent much larger absolute sums on compliance, but this amounted to a lower percentage of overall expenses, the GAO found.

Within their AML and BSA spending, banks spent the most on customer due diligence – 29% of total compliance costs on average. Reporting costs accounted for 28% on average, while 18% was attributed to training, testing and internal controls. Software and third-party costs accounted for 17% of AML/BSA costs on average.

No banks imposed direct fees to recoup these expenses, but one large credit union reported that it did levy a charge. However, banks reported to the GAO that they had restricted access to higher-risk products and services in an effort to manage both risks and costs.

In addition, the GAO’s report suggested that the AML/BSA requirements placed on banks could increase the cost of offering online account opening services.

In a sample of 11 banks and credit unions analyzed by the GAO, AML/BSA costs ranged from 0.4% of operating expenses for a large community bank to 2.4% for a small community bank. For one large credit union, compliance with the rules accounted for 4.9% of operating expenses.

The two “very large” banks in the sample reported costs of $15 million and $21 million, although in both cases this was less than 1% of total expenses.

The Financial Times reported last month that regulators had levied more in anti-money laundering fines in the first half of 2020 than they did in the whole of 2019.

Citing data from consultancy group Duff & Phelps, the FT said total global AML fines hit $706 million between January and June, compared to $444m across the whole of 2019.

However, fewer large fines were levied in the US, which Duff & Phelps said could reflect US banks getting up to speed with the rules.

The GAO’s study is available here.

back to top

Sections

About Us

Connect With Us

Resources

Webinar — Leveraging Open Banking Trends to Transform Your Institution

Time/Date: October 5th, 2:00 CT

The concept of open banking is ushering in exciting new possibilities for financial institutions of all sizes, transforming how they do business and driving new revenue opportunities. Join Shane Ferrell, Vice President of Product Strategy and Director of Software Engineering Barkley Hughes as they answer these questions and more: 

• What is open banking, and how does a financial institution take full advantage of this rapidly growing technology?

• What are key areas to look for when considering leveraging a third-party technology or an open banking marketplace?

• What role does FDX play in the future of open banking?

REGISTER NOW!

This webinar is brought to you by:
OneSpan logo