For years, spreadsheets have been the quiet workhorse of financial crime risk assessments. Familiar, flexible and easily accessible, they became embedded in compliance functions long before today’s regulatory complexity took hold.
According to Arctic Intelligence, in many institutions, they remain the default tool for assessing money laundering, terrorist financing and proliferation financing exposure. Yet what was once practical has become problematic.
As organisations expand across products, jurisdictions and digital channels, reliance on spreadsheets is turning into a structural vulnerability rather than a convenience.
Modern financial crime risk management demands far more than simple calculations. Effective ML, TF and PF risk assessments require robust governance frameworks, consistent methodologies, version control, audit trails and evidence management. They must demonstrate defensibility to regulators and transparency to Boards.
While spreadsheets can perform arithmetic, they cannot enforce governance standards. They cannot ensure scoring consistency across business units, prevent unauthorised edits, maintain traceable data lineage or dynamically adjust to changing regulatory expectations. Increasingly, institutions are discovering that spreadsheets were never designed to shoulder such responsibility.
The fragility of spreadsheet-driven processes is often underestimated. A single overwritten formula or an unnoticed error can undermine months of work. Multiple versions circulate through email chains, contributors edit outdated templates, and critical evidence ends up scattered across inboxes rather than securely attached to control records. These weaknesses remain hidden until a moment of scrutiny: a regulatory review, an internal audit, or a Board-level challenge. At that point, what seemed structured reveals itself to be precarious.
Governance, in particular, suffers quietly in manual environments. Approvals are handled via email threads, methodological adjustments are undocumented, and scoring rationales are inconsistently recorded. When regulators ask how a particular risk rating was determined, teams may find themselves reconstructing decisions retrospectively. In an era where accountability is paramount, trust-based processes are no longer sufficient. Regulators expect clarity around who made decisions, when they were made, and what evidence supported them. Spreadsheets cannot reliably provide that assurance.
There is also a hidden operational cost. Although spreadsheet licences appear inexpensive, the manpower required to maintain them is substantial. Compliance teams devote hundreds of hours each year reconciling versions, validating formulas and compiling reports. As businesses grow—adding customers, products, jurisdictions and delivery channels—the manual model strains under mounting complexity. What worked for a small entity becomes unmanageable at scale. Over time, institutions become trapped in administrative burden rather than focusing on meaningful risk mitigation.
Purpose-built RegTech platforms are reshaping this landscape. Rather than layering complexity onto spreadsheets, modern financial crime risk assessment systems embed governance directly into the workflow. They enforce consistent methodologies, maintain complete audit trails, centralise evidence and support multi-entity oversight.
Automated calculations reduce human error, dashboards provide real-time visibility, and trend analysis transforms static assessments into dynamic risk intelligence. The shift is not incremental; it represents a fundamental change in how risk is understood and managed.
Spreadsheets remain valuable analytical tools, but they are misaligned with the demands of contemporary financial crime compliance. Their limitations are cumulative and often invisible until exposed by regulatory scrutiny or operational failure.
Leading organisations are recognising that scalable, auditable systems are no longer optional but essential. The comfort of spreadsheets may be familiar, but the risks associated with continued reliance are growing. For institutions serious about governance, resilience and regulatory defensibility, stepping beyond the spreadsheet trap is becoming a strategic imperative.
Copyright © 2026 RegTech Analyst
Copyright © 2018 RegTech Analyst
