Effective compliance requires a 360 approachshieldadmin
Businesses in regulated industries expend vast amounts of time and company resources on ensuring company-wide compliance. Regulated companies invested over $1.3 million in compliance technology on average during last year alone, and the cost of compliance is only continuing to increase. Much of this is due to the increasingly complex regulations that agencies are enacting to combat sophisticated cybercrimes. However, fortunately for today’s financial services company, enterprises are developing software solutions designed to increase efficiency in this complex field.
Financial firms: know your customer
The digital age has transformed the way financial services companies do business. On one hand, banks and financial companies can offer services to customers around the world. This has not only increased firms’ access to new clients, but it’s also opened up financial services to critically underserved communities. On the other hand, however, criminals also now have unprecedented access to electronic banking and trading platforms they can use to facilitate illicit financial activity.
Agencies around the world have imposed electronic data management requirements, including the increasingly-stringently Know Your Customer (“KYC”) processes, in an attempt to curb financial crimes. KYC regulations apply to banks that could be used for money laundering or other financial crimes without their knowledge or complicity. Rather than permitting financial service providers to turn a blind eye, regulators are now requiring companies that offer banking services to create and enforce formal policies regarding customer screening and identification. This typically includes the monitoring of transactions and management of other key pieces of transaction-related data.
Regulatory technology and enterprise software offer solutions
KYC regulations and similar rules have imposed rigorous and robust data collection requirements on financial institutions around the world. However, many companies collect unstructured data in forms ranging from voice and video recordings to written messages sent through any number of popular platforms. Rather than filing this raw data away, enterprise software can enrich the information collected in a company’s regulatory compliance programs, making it suitable for any number of managerial applications.
Data that financial companies collect for regulatory compliance purposes can be used to boost customer retention, order processing, trade executions, and several other company operations. Effective software solutions help compliance officers take a full-scale view of each trade and more easily investigate any possible rule violations. Some regulatory technologies even include AI capabilities like false positive reduction or natural language processing (NLP) that autonomously recognizes and scans chats between traders and customers, preventing any potential breach of regulatory requirements in real-time.
Compliance and Operations should work hand-in-hand
The effective deployment of any regulatory compliance technology requires companies to take a full-scale view of their compliance efforts. This is necessary because creating a compliance system that works for your company requires identification and implementation of the strategic elements necessary to make sure operations fall in line with legal requirements. Only by looking at regulatory compliance systems as a whole can companies transform the often-cumbersome process from a burden to a potential benefit.
Rachel Przybylski, Head of Market Structure at Saxo Capital Markets UK, explains how critical it is to perform an in-depth and far-reaching analysis of existing regulatory compliance structures when deploying new technology. “As we implement tactically,” Przybylski explains, “we’re also looking at how to resource strategically for a more holistic approach.” This is due to the fact that companies must make a meaningful review of their regulatory compliance needs, operational structure, and how these two critical businesses processes can work together in order to capture the best possible benefits of cutting-edge technology. “How do we make sure that we’re happy with the implementation we’ve made, that we add more strategic elements, and how does that tie in to any updates that we want to make in collecting data for future needs, particularly with onboarding clients?”, Przybylski queries.
The fact of the matter is that to answer these questions companies more often than not must undertake a massive technical and data-driven review.
While many companies balk at the notion of setting up complex data management and holistically-designed regulatory compliance systems, Przybylski and experts like her aren’t accepting any excuses. “How can you represent results if you haven’t got the best set of data possible?” she challenges as if to especially call out companies who are dragging their feet on updating their regulatory compliance processes.
Today’s information-driven markets thrive on the strategic use of data, and while setting up a holistic regulatory compliance structure in today’s complex environment is a challenge from any perspective, doing so is critical to making sure that your company’s regulatory compliance program is both efficient and effective.