As we enter a new year, staying up-to-date with key developments in financial regulation 2022 and fraud management will be critical if financial organisations wish to stay compliant and avoid hefty sanctions.
This would require them to take a look at the key factors that are affecting the finance industry.
Whether it be the rise of FinTech, growing awareness about climate change, or cybersecurity concerns, we can expect external factors to have a significant influence on regulatory reform and change.
For instance, the UK government has already unveiled the Sustainable Finance Roadmap and the EU’s Sustainable Finance Disclosure Regulation (SFDR) to encourage financial firms to incorporate sustainability initiatives into financial operations.
Paying attention to these developments could give us insight into the type of compliance amendments that are coming in the months ahead.
Here are some of the latest developments we believe will dominate the finance industry.
Financial regulation 2022
Cryptocurrency and digital assets will be regulated
Regulatory activity around cryptocurrency and digital assets continue to intensify as consumers, companies, and investors pour money into this new investment apparatus. Given the immense growth of cryptocurrency, we can expect regulators to pass even more stringent laws to regulate activity within this sector.
Critical areas they might focus on include licensing, fraud, financial crimes, money laundering, and investor protection.
Regulators would have the unenviable task of developing licensing guidelines, risk policies, procedures, and controls for these increasingly popular digital assets.
Stringent regulations for fraud and other financial crimes
The growth of decentralised FinTech has led to a higher risk of fraud and financial crimes in the modern financial landscape.
For example, Synthetic Identity Fraud (SIF) is among the fastest-growing financial crimes in the US, where fraudsters create a false identity and build a credit file over time using a combination of real and fabricated information, which is difficult to track with conventional fraud models.
Given the fast pace at which crimes evolve, we can expect regulatory updates that encourage firms to tackle newer and more sophisticated forms of financial crimes with the aid of disruptive technology such as automated fraud detection and real-time monitoring tools.
Moreover, regulators may look to reduce the risk of financial crime by establishing mature insider risk programs designed to account for more recent threats.
Sustainability initiatives will drive regulation
While we’ve already seen the UK government pass several legislatures earlier this year to drive sustainability initiatives, we expect more regulatory changes to push financial firms to adopt eco-friendly processes in their everyday operations.
We might see climate change regulation that focuses on establishing effective governance structures that will help companies make strategic decisions around climate change.
Regulatory organisations would also be focused on developing and identifying qualitative and quantitative metrics to help the finance industry measure its progress in achieving sustainable goals.
New regulations will tackle risk complacency
Complacency among financial service companies is a major risk because it erodes company safety, integrity, and stakeholder trust, particularly when the industry goes through phases of growth.
Hence, we can expect regulations in this area to encourage firms to guard against overconfidence, particularly during times of innovation and growth, by adopting robust risk controls and investing heavily in compliance management.
Anticipate and adapt to key developments in financial regulation
Given how financial regulation will continue to grow in scope and scale in 2022, devising ways to obtain these updates and incorporate them into internal procedures will be critical for the ongoing success of financial organisations.
But, this will place tremendous strain on compliance teams, as it requires the effort of several departments to make the necessary changes to internal procedures.
Hence, finance firms may need to devise effective ways for streamlining regulatory management, from the point of receiving the updates to the stage where the update needs to be integrated within internal operations.
This is where RegTech solutions can come in handy; automated regulatory compliance software leverages AI to convert regulatory management from a lengthy and manual process into an efficient and agile one, making it easier to respond to the latest developments in regulatory compliance.