Data silos_ the real compliance killer

Data Silos: the real compliance killer

Modern financial regulations require firms to monitor, track and report data on innumerable transactions, customers, and business activities. The potential burdens of these requirements are massive, and many financial institutions are still working out how to achieve full compliance without disrupting operational efficiency.

This is particularly true given the fact that many banks and financial firms place the responsibility for monitoring email communications, calls, transactions, e-commerce activities, and trade data, squarely within the scope of the IT department. More often than not, this information is simply dumped into an isolated repository for compliance professionals to sift through later. This approach creates unnecessary challenges for compliance officers, who must perform audits and reviews relying on what may amount to millions of pieces of raw data.

Regulatory technology experts across the financial industry are encouraging banks to get away from the data silo model of compliance information management. “For all of the reporting-type regulations, people are working towards a more strategic platform that’s better controlled so they can understand what data is being used and how it is being used,” says Harps Sidhu, Partner and Head of Capital Markets Consulting and Head of FS Regulatory Change at KPMG. This will not only facilitate compliance, it will also give financial firms the opportunity to utilize the information they gather in a manner that improves operations companywide.

Bottomless pits of compliance data

Access to data is becoming the most significant barrier to integrating the type of efficient data management and analysis that modern financial firms need to compete in increasingly regulated markets. This is because most banks are simply requiring their IT professionals to monitor compliance-related data and dump them into digital repositories known as data silos. Since there is typically little organizational structure, quality assurance, or auditing for these types of files, performing a compliance investigation based on this data can be just as frustrating as finding a needle in a haystack. And of course, that’s all assuming that the compliance-related data is actually being collected and stored properly.

The data silo model seems simple enough – just collect the information that’s required and file it away. However, Sidhu encourages financial firms to closely monitor the quality and completeness of compliance-related data. “Is the data all making it to the repository? Is any of it being suppressed or modified?” Sidhu ponders, raising some of the relevant concerns today’s financial firms should consider when using data silos.

Capture correlate analyze report

Better data management practices facilitate compliance

Large financial firms almost certainly have the resources and systems at their disposal necessary to track and manage compliance-related data. However, the main challenge to ensuring effective compliance management, auditing, and investigations is a lack of components or platforms – it’s an excess of information that isn’t being made useful. “Generally, the problem large banks have is with data,” Sidhu explains, highlighting a surprising problem affecting compliance officers across the financial industry.

Compliance officers struggle to create investigations based on the emails, calls, and trade-related information dumped into data silos. They’re forced to tiptoe between regulations, specific requirements, and mounds of sometimes disorganized data…

In order for the compliance officers to perform better, they need more efficient access to relevant data. Data silos make it difficult for compliance officers to do their jobs quickly and effectively, and they can even impede the integration of the advanced Artificial Intelligence and Machine Learning capabilities developed by today’s RegTech companies. In order to improve regulatory compliance in today’s increasingly competitive financial services market, firms are well advised to move away from data silos: the real compliance killer.

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