Transforming compliance monitoring approaches in banks


The past 18 months have fundamentally changed the way businesses across every industry operate. Even financial institutions were not spared from the impacts of the pandemic, and since then, they’ve been pushed to adopt sweeping changes and disruptive technologies to ensure resilience and continuity in the wake of COVID-19.

This push towards technological adoption, however, has created gaps in regulatory compliance controls since these practices may not be optimised for the kind of technological capabilities we’re now empowered with. 

A recent study on European banks conducted by EY revealed that these institutions are still following traditional compliance controls even though the compliance landscape has undergone a drastic change, exposing banks to significant risks.

To avoid hefty non-compliance sanctions, banks need to transform their compliance functions in line with the changes in regulations and their resulting requirements. 

Strengthening the case for compliance transformation is the fact that banks and other financial institutions are vital to the functioning and stability of the economy at large.

In this post, let’s look at what avenues are available for banks to transform compliance monitoring and how they can approach it to overcome upcoming challenges.


The need for a transformation in traditional compliance monitoring

Even before the pandemic hit, the compliance function across financial institutions required a major overhaul. As regulations became more complex, authorities demanded more transparency across compliance practices and customer preferences started to shift.

Banks, however, were able to get by without transforming their operations due to a lack of major disruptions across the compliance landscape.

The great equaliser, however, came in the shape of a pandemic, forcing banks to embrace a digital ecosystem at a scale to which the industry had never been exposed before.

Regulatory bodies responded to this by rejigging, rescinding and introducing several regulations to ensure banks and other financial institutions became more resilient.

All these changes in regulations and customer preferences have, subsequently, raised an important question: Do banks have the capacity and knowledge to handle these changes in a dynamic business environment?

The short answer is no. Traditional compliance monitoring doesn’t hold firm in the new normal of the industry.


What’s the solution to these changes and challenges?

Compliance professionals are already looking into ways to take a strategic view of the changes unfolding across the compliance landscape. 

To do so, they require new skills and tools to create an effective compliance control system to address this ever-developing and technologically agile environment.

The participant banks of the EY study agree that it is imperative to adopt a technology-backed compliance function that can be seen as a strong business advisor, has a proactive, forward-looking approach to compliance, and retains core compliance skills at the core.

This kind of function should prioritise technological adoption and a more data-driven approach. That said, these priorities should transform the compliance function in a way that complements traditional practices.

This new and improved approach will utilise data-backed tools such as AI-powered regulatory horizon scanning, digital compliance rule books, and compliance mapping to complement core skills. 

All elements that support a new kind of compliance monitoring.

By doing so, banks can develop a compliance function that fosters trust, promotes transparency, increases resilience and prioritises agility to respond to changes across regulations. 

These tools also allow banks to automate compliance documentation, monitoring, and oversight. 

Financial institutions like banks, however, will still need to monitor issues like payment breaks and payment deferrals; functions that still require human intervention.


Banks need to transform compliance management to stay on top of regulatory requirements in the new normal

Banks are some of the most strictly regulated companies across all industries and recent developments as a result of the COVID-19 pandemic have led to more stringent regulations.

Financial institutions need to transform their compliance monitoring practices to meet evolving regulatory requirements and handle the shift towards digital service provision. 

Compliance management technology, then, represents the new normal.

Downloads Alert