Top regulatory compliance concerns in the finance industry

Regulatory compliance

As the world makes a slow, gradual transition into the new normal, concerns are arising about the scope and complexity of financial regulatory compliance. 

With regulatory organisations passing stringent regulations on all areas of financial operations, data security, and financial transactions to help the economy recover from the effects of the pandemic, many financial organisations are struggling to stay on top of their regulatory requirements.

In this post, we take a deep dive into regulatory compliance challenges facing the financial industry.


Concerns facing the finance industry

In recent years, the increasing structural complexity of the global regulatory landscape has led to the following concerns in the financial industry. 


The costly scope of regulation 

As regulations become ever more complex, their scope becomes a significant concern for most financial institutions considering that they must abide by the rules of several regulatory institutions. 

Financial institutions in the USA, for example, must ensure compliance with regulations from over 750 regulatory bodies at the city, state, and federal levels, which prompts concerns about how manageable regulations are. 

What this means is that abiding by these regulations while keeping compliance costs under control has become one of the biggest challenges facing financial institutions today.

Today, banks and other financial institutions are paying $270 billion per year on compliance, and reports suggest that the cost of compliance will double in 2022. 


Improving risk management

As per Basel III regulations, real-time calculations must be an integral part of risk management, but most firms have difficulty incorporating real-time calculations into their risk management processes, exposing them to non-compliance risks.

To overcome this challenge, firms are looking to address risk challenges by integrating different protective measures such as surveillance and control processes into compliance.


Monitoring for cybercrime 

Implementing processes to monitor cybercrime has become a growing concern for many institutions in recent years. 

With regulatory laws having strict reporting and compliance standards for money laundering, insider trading, front running, and other cybercrime practices, accounting for these operations require extensive surveillance operations, which can be a costly and resource-intensive endeavour. 


Optimising reporting standards 

With regulatory bodies and stakeholders expecting transparency in financial operations, meeting the stringent reporting standards is a considerable challenge for financial organisations.

This is because different legal institutions at the regional and national level have their own reporting standards, forcing compliance teams to spend an exorbitant amount of time and resources to comply with multiple reporting standards simultaneously. 

Moreover, financial institutions need to make reporting more transparent by tracking actions, placing timestamps, and recalling specific data points as part of their procedures.

Due to the resources and time needed to meet these reporting requirements, finding ways to streamline the process is crucial to cut down on compliance costs.


Building a compliance culture 

Financial institutions need to build a strong governance culture to overcome horizontal reviews by regulators that scan sales practices, data security measures, employee sales goals, and even compensation procedures.

That said, building a robust compliance culture takes time, particularly for organisations that operate in multiple countries.  

To meet these challenges, financial service providers must find a way to make regulatory data more accessible to employees outside their compliance departments.


Managing cross-border regulations 

While the pandemic had a regressive effect on international finance, transnational financial transactions continue to be an integral cornerstone of the financial industry, meaning that financial institutions will have to deal with the complexity of cross-border regulations.

To meet cross-border regulatory policy measures, financial institutions need to undertake a more strategic assessment of their compliance policy.


Leveraging RegTech solutions is key to overcoming regulatory compliance concerns

Given the growing scope and complexity of financial services regulatory compliance, institutions need to devise ways to make compliance procedures more efficient while meeting the standards set by the regulatory bodies.

Using RegTech solutions such as regulatory intelligence allows financial institutions to automate and streamline several compliance procedures, making the scope of the work much more feasible and manageable than before. 

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