The Cost of a Bad AML Hire | The Real Cost to Hire, Part 4

Oct 27

6 min read

Hire the wrong person into an anti-money laundering (AML) role and the salary is the smallest part of the bill. You also pay for months of work that has to be checked again, for a second recruitment, for a second ramp-up and, sometimes, for findings a supervisor attaches to your firm's name. In the illustrative Vilnius model below, a bad hire spotted after six months costs around EUR 26,600, close to three-quarters of the analyst's annual gross salary, before counting the empty seat or any regulatory fallout.

This is Part 4 of The Real Cost to Hire. Part 3 looked at the months before a good hire pays off. This one is about the hire who never does, and about a statistic you have probably seen in a recruitment pitch deck.

The "30% of first-year earnings" figure has no source

Search for the cost of a bad hire and the same line keeps coming back: the US Department of Labor puts it at 30% of the employee's first-year earnings. We could not find a Department of Labor publication that contains it. The articles quoting it cite each other, or nothing. Treat it as folklore until someone produces the original.

The best-known survey that can be traced is CareerBuilder's. Its December 2017 release, based on a Harris Poll of 2,257 US hiring managers and HR professionals, reported that 74% of employers said they had hired the wrong person for a position, and that companies lost an average of USD 14,900 per bad hire over the previous year. That is a real number, but a self-reported, American, cross-industry one from nine years ago. It says little about a KYC (know your customer) analyst in Vilnius. In compliance, the bigger cost is usually what the wrong person signed off.

When the wrong person holds the job

In October 2016 the UK Financial Conduct Authority (FCA) fined Sonali Bank (UK) GBP 3,250,600 and stopped it from accepting deposits from new customers for 168 days. In a separate Final Notice it fined the bank's former money laundering reporting officer (MLRO), Steven Smith, GBP 17,900 and banned him from MLRO and compliance oversight roles. The FCA found "a serious lack of competence and capability". He had "continued throughout the Relevant Period to reassure the board" that AML systems were working, and took no steps to investigate a "surprising" lack of suspicious activity reports.

The same notice is fair to him. The FCA accepted that he was "overworked personally", that he "suffered from a serious lack of management support", and that his resources were "only partially within his control". He also failed, in the FCA's words, to ensure that further resource "was recruited in a timely fashion". That is the uncomfortable part: from the outside, a mis-hire and an under-resourced function look much the same, and the firm pays for both.

The second case is about integrity rather than skill. In a Final Notice dated 24 July 2026, the FCA banned Dharmendra Solanki from any function in regulated financial services. He had been approved as an MLRO at several authorised firms between March 2018 and July 2022. Over much of that period he also ran an unauthorised lending business, and in October 2023 he pleaded guilty to carrying on a regulated activity without authorisation and to money laundering. The FCA made no finding about his work at those firms; its decision rests on his lack of integrity. Background checks at hiring are a snapshot, not a guarantee.

Wrong seniority is a mis-hire too

Plenty of compliance mis-hires are good people in the wrong seat. A strong KYC analyst made compliance officer of a growing electronic money institution may know the casework and still lack the standing to tell a board it needs three more people.

The European Banking Authority's guidelines on AML/CFT compliance officers (EBA/GL/2022/05) list what a firm should check before appointing one: "appropriate AML/CFT skills and expertise", relevant experience in managing money laundering and terrorist financing risk, and "sufficient time and seniority to perform his/her functions effectively, independently and autonomously". Seniority is on that list for a reason. Smith's case shows what happens when the person in the seat cannot win the resourcing argument. The reverse, a senior investigator stuck on routine reviews, often ends in a resignation, which is Part 5's subject.

An illustrative mis-hire model

Same Vilnius analyst as in Parts 1 and 3: EUR 36,000 gross a year, about EUR 705 a week including employer contributions. Illustrative assumptions: the problem only shows up in a quality review in month five, and the analyst leaves at the end of month six.

Low-value months: 26 weeks of employment cost come to about EUR 18,300. If the work was worth half a capable colleague's output, about EUR 9,200 is lost.
Rework: working at half speed, the analyst closed around 300 files. If a quarter need reopening at two hours each by a senior analyst on EUR 48,000 gross, that is 150 hours, or about EUR 3,500.
Second recruitment: the agency fee assumption from Part 1, 20% of salary, is EUR 7,200.
Second ramp-up: about EUR 6,750, the Part 3 estimate for a same-sector hire.

That adds up to about EUR 26,600, or 74% of gross salary. It leaves out notice pay or severance, the vacancy between the two hires, management time, and whatever an inspector might find in those 75 reopened files. If an inspection is coming, our guide to preparing for an FNTT inspection covers what tends to be asked for.

Why mis-hires surface late, and where the country matters

An AML mis-hire is rarely obvious early. Everyone is slow while learning, and errors sit in files nobody has sampled yet. Lithuania's Labour Code caps probation at three months, which in our model ends two months before the review that finds the problem.

In the UK the window is shrinking. Today employees generally need two years' service before they can bring an ordinary unfair dismissal claim. The government's unfair dismissal factsheet says that will fall to six months from 1 January 2027. A UK firm that finds its mis-hire in month eight next year will be in a very different position from one that found it this year.

UK firms also carry a layer most EU firms do not. Under the Senior Managers Regime, an MLRO needs FCA approval before starting and must be assessed as fit and proper every year. Under the EBA guidelines, the pre-appointment check sits mainly with the firm. Neither system removes the risk; they change who checks, and how often. Part 6 compares notice, probation and dismissal rules across the Baltics, Poland, Germany, the Nordics and the UK.

Checks that catch a mis-hire earlier

Test candidates on realistic, anonymised work before the offer: a corporate file with a layered ownership structure, a set of alerts, and a written rationale.
For compliance officer and Team Lead roles, ask when they last argued for more resources, and what happened.
Agree what a finished case looks like and sample the new hire's files from week two, not month five.
Hold the probation review against written checkpoints and real quality data, before probation ends.
Repeat integrity checks for key roles during employment, not only at hiring.

Where outsourced analysts fit

Outsourcing changes who carries the mis-hire risk. CAML's analysts each have more than five years of AML experience and work under ACAMS-certified Team Leads, with four-eyes review on critical tasks. Every engagement starts with a one-week onboarding and training period that ends in an agreed KPI (key performance indicator) baseline, so a poor fit shows up in weeks rather than at a month-five review. Replacing an analyst becomes a conversation with the provider, not a recruitment campaign. The regulated firm still has to keep enough in-house substance to oversee the work, as our summary of EU outsourcing requirements for fintechs explains.

Frequently asked questions

How much does a bad hire cost in AML compliance?

There is no reliable published figure for compliance roles. In our illustrative Vilnius model, an analyst who turns out to be the wrong hire and leaves after six months costs about EUR 26,600, around 74% of gross salary, before vacancy time, notice pay and any regulatory consequences.

Does a bad hire really cost 30% of first-year salary?

The figure is widely attributed to the US Department of Labor, but we could not trace it to any Department of Labor publication. The best-known traceable survey, CareerBuilder's 2017 poll of US employers, put the average at USD 14,900 per bad hire.

Can an MLRO be personally fined?

In the UK, yes. The FCA fined Sonali Bank's former MLRO GBP 17,900 in 2016 and banned him from MLRO and compliance oversight roles.

Getting the hire right

The expensive mis-hire is rarely the one who struggles in week two. It is the one who looks fine until someone samples their files, or until an inspector does. Most of that cost is decided before the offer goes out: in how the role is defined, how candidates are tested, and how early their work is checked. If you need experienced AML capacity while you take the time to hire well, talk to CAML.

About this series. The Real Cost to Hire is an eight-part series on what AML hiring decisions leave out. Part 1 set out the fully loaded cost of an AML analyst, Part 2 what an empty AML seat costs and Part 3 how long a new AML analyst takes to become productive. Part 5 looks at turnover and the counter-offer loop: notice periods, garden leave and the knowledge that leaves with the people.