The true cost of compliance

💰 Is compliance training really worth the cost? Let’s delve into the numbers.

Many CSPs perceive AML/CFT/CPF training as cost of compliance. However, when you calculate the true cost of non-compliance, the significance of investing in AML/CFT/CPF training for your team becomes more apparent.

Let's consider the concept of the Expected Annual Cost of Non-Compliance (EANC), where:

EANC = Likelihood of breach X cost per breach

Now, imagine two CSPs, each with 10 employees:

🔹 CSP A allocates $500 per employee annually for AML/CFT training.

🔹 CSP B forgoes training and relies on templated SOPs and processes.

Using the following assumptions:

Cost of non-compliance breach = $100,000 per breach under the new CSP Act

Likelihood of breach (studies shows that firms with weak internal controls and limited staff competency are at significantly higher risk of ML/TF/PF breaches):

📚 With training = 3% (0.03)

🚫 Without training = 15% (0.15)

Here's the breakdown:

CSP A (With Training):

EANC = 0.03 × $100,000 = $3,000 per employee

Total for 10 staff = $30,000

Training = $500 × 10 = $5,000

➡️ Total Annual Cost: $35,000

CSP B (No Training):

EANC = 0.15 × $100,000 = $15,000 per employee

Total for 10 staff = $150,000

➡️ Total Annual Cost: $150,000

For every $1 invested in training, CSP A can potentially mitigate $23 from enforcement actions. 

Even if you take a conservative approach in your business and avoid higher risks customers/situations, you will not be able to 100% avoid illicit actors from trying to misuse your services. 

So what's the bottom line?

Investing in training is not an expense but a risk management strategy. It enhances your internal capabilities, reduces regulatory risks faced by your CSP, and empowers your business for growth.

🆙 Keep UP. Level UP. Scale UP. 🆙