The shift to digital banking has increased financial institutions’ exposure to sophisticated financial crimes, a global survey of financial institutions has found. LexisNexis Risk Solutions commissioned Forrester Consulting to survey executives at more than 1000 banks and other financial institutions for its 2023 Financial Crime Compliance Study. Almost all (98 per cent) reported compliance costs rising in line with greater challenges. More than half reported a “significant” increase in financial crimes involving digital payments and cryptocurrencies. Respondents said financial crime involving digital payments was the area where they had seen an increase in activity over the past 12 months. “A striking number of respondents reported a surge in financial crimes facilitated by digital payments. These attacks exploit vulnerabilities in digital payment systems by using sophisticated techniques to impersonate users, conduct phishing scams or manipulate transactions,” the report said. Based on survey responses, Forrester estimated that financial institutions spent US$206 billion on financial crime compliance over the past year. “While digital transformation has ushered in growth opportunities, it has also exposed institutions to higher risk of financial crimes,” the report said. Eighty-one per cent of respondents said they had introduced a formal process for identifying and tracking new types of crime and new criminal methodologies, and assessing their impact on their businesses. Respondents said they were being forced to re-evaluate their financial crime compliance processes and looking at improvements to data quality, ‘know your customer’ processes, anti-money laundering and transaction monitoring. Eighty per cent said they were looking to improve their operational resilience. Respondents said one of their big challenges was to improve security without compromising the customer experience.  “While consumers have come to expect near-instant gratification when completing financial transactions, financial institutions are having to introduce increasingly complex compliance regulations, which creates roadblocks in the customer experience. This puts many financial institutions in the precarious position of balancing customer satisfaction and regulatory adherence,” the report said. Seventy-eight per cent said regulations had become so complex they were deterring them from some areas of business or prompting them to outsource some activities.