The labour cost of complying with anti-money laundering (AML) requirements is steeper for financial institutions that are less reliant on technology, a new report finds.

A study from LexisNexis Risk Solutions Inc. polled 143 decision makers from banks, investment firms, asset managers and insurance companies in the U.S. and Canada on the costs of AML compliance.

It broke down costs by compliance area (e.g., sanctions, transaction monitoring, technology, KYC due diligence, etc.), the amount spent on full-time employees focused on compliance, as well as processing time for compliance-related tasks.

According to the findings, American and Canadian firms of similar sizes spend similar amounts on compliance.

Small Canadian firms — defined as having less than US$10 billion in total assets (all figures in U.S. dollars) — spend an average of $1.4 million annually on AML compliance, compared to $1.5 million for small U.S. firms, the study found.

Mid-to-large Canadian firms (with more than $10 billion in total assets) spend an average of $14 million annually, compared to the $14.3 million spent by U.S. firms of similar sizes.

While smaller firms spend less overall per year, the study found that they are also less likely to use technology in their AML compliance efforts, which, in turn, increases their average labour cost.

Small firms that leveraged one or no technologies or services for AML compliance spent an average of $8.4 million annually on compliance, of which their labour cost was $4.9 million (58% of the overall cost).

Larger firms that used two or three technologies/services spent an average of $13.6 million on compliance, of which $7.3 million (54%) was spent on labour. Firms that used four or more technologies spent an average of $15.5 million on compliance, of which $7.4 million (48%) was spent on labour.

“Findings show that U.S. and Canadian financial firms which effectively use compliance technology more are able realize a lower average cost per [employee] than those who do not,” the study said.

“This is important since human resource costs tend to trend upwards year-over-year and quite sharply when firms are faced with increasing regulatory pressures.”

Read the full True Cost of AML Compliance study.