Understanding Compliance Risk in Finance and Banking

The enforcer brought more than $600m in civil penalties against more than 70 firms, with 26 firms fined a total of $390m in August alone for widespread record-keeping failures. The initiative has seen the regulator fine financial compliance over 100 firms a combined total of more than $2bn since December 2021. The most important components of the GBLA include the Federal Trade Commission (FTC) Safeguards Rule, which requires the development of a written information security plan, and the Financial Privacy Rule, which governs how financial data is collected and shared. Financial regulatory compliance is different and stricter than regulatory obligations for other industries.

Consumer perspectives on sustainability in 2024

Take your efforts further and consider working with a specialized fintech business. There are more financial regulations every year to counter the evolving environment. It is a series of financial data security guidelines to safeguard consumer data. The key to containing financial compliance costs is to have technology in place that connects siloed information. That way, you can understand what you’re facing, how everything interrelates – and instantly know if something is going wrong. In an ever-changing cybersecurity landscape, financial organizations can follow this framework to understand compliance.

• The compliance team must update employees on changes to compliance requirements.
• In the US, the Federal Reserve, the Central Bank of America, ensures compliance with monetary policy.
• Content concerning risk will cover such as interest rates, liquidity concerns, regulatory considerations, cybersecurity, stress testing and more.
• Consistently communicate about financial compliance policies and updates with your employees.
• Each week we send the latest news, industry reports, regulatory guidance and software recommendations direct to your inbox.
• Like other regulations, the NCUA calls for encryption to safeguard member data, governance policies to ensure accountability, and application security measures to protect against cyber threats.
• Whether you require assistance with regulatory change management, digital rulebooks, or compliance monitoring workflows, we have the expertise to ensure your institution remains compliant and secure.

General Data Protection Regulation (GDPR)

It helps maintain the stability of the financial system and shields your business from legal penalties, financial fraud, and reputational damage. Financial regulatory compliance is not a separate function of an organization. It is an integral part of the business that affects the entire organization. When you have a set person responsible, you can manage financial regulatory compliance in a better way. The compliance team must update employees on changes to compliance requirements. Ensuring compliance might mean new employee training when company policies and procedures change.

To address compliance risk, banks operating in international geographies must incorporate geopolitical risk in their overall risk management practices. Domestic compliance officers should remain alert and embrace international changes quickly. Even if regulations become more relaxed with new political winds (whether domestically or internationally), compliance officers are responsible for assessing the vacuum left in the wake of prior regulations and/or interpreting the relevance of new regulations. GDPR opened the door to a flood of data-privacy regulations around the world.

Technology to Support Financial Compliance

This presents a paradox as sustainable financial services can often drive significant impact. Compliance is no longer a “nice-to-have”—it’s essential for thriving in a competitive and highly regulated industry. By partnering with a trusted technology provider like Beeks, your organisation can focus on growth and innovation while knowing your infrastructure is secure, scalable, and aligned with regulatory requirements.

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The department also resolves compliance issues as they arise and advised the business on rules and controls. A compliance risk assessment methodically reviews and scores an organization on its ability to meet and manage external and internal hazards. The final score measures the potential threat of exposure to future legal penalties, reputation damages, monetary fines, and material loss.

FinregE provides comprehensive solutions that assist financial institutions in navigating the complex web of regulatory requirements. Whether you require assistance with regulatory change management, digital rulebooks, or compliance monitoring workflows, we have the expertise to ensure your institution remains compliant and secure. But dive a little deeper, and you’ll see that there are many aspects of financial compliance, including risk assessment, anti-money laundering, and KYC. Here, we’ll explore these and examine common financial regulations and how organizations can achieve compliance. Well, we could say that financial compliance encompasses all of the actions an organization takes to remain on the right side of the laws and policies that govern the financial services sector and capital markets.

• By adopting a proactive risk management approach, organizations can reduce their exposure to potential risks, enhance their financial resilience, and improve their overall performance.
• Banks also need to acquire or develop more sophisticated systems to monitor all transactions.
• The NIS2 Directive introduces a shared responsibility model, requiring closer collaboration between financial institutions and their infrastructure providers.
• With regulators increasing their scrutiny of financial services firms, compliance failures are not simply an administrative oversight but a strategic business risk.
• This stronger risk culture includes timely information sharing, rapid escalation of emerging risks as well as willingness to challenge existing practices.
• To meet expectations, you need technology that can efficiently collect and analyze relevant data throughout your entire value chain.

About Consumer Financial Protection Circulars

Open-source tools allow financial firms to develop and customize their own compliance management systems, offering a more flexible approach than traditional commercial software. Compliance risk can be incurred, for example, whenever technology compliance requirements are not met. Therefore, compliance should be construed broadly, especially as it cuts across enterprise technology, information security and cybersecurity (figure 1).

Your organization wants to stay compliant and avoid a potential fine or penalty. Any sensitive information, for example, cardholder data, must be 100% secure. The AML directives aim to prevent money laundering and financial support for terrorists. It can help prevent a fine or penalty from the regulators or, in extreme cases, imprisonment.

This software can manage compliance documents and ensure that any core deadlines for local and federal laws are met. Bank M&A topics will include balance sheet considerations for both the acquiring and acquired financial institutions such as deposits, capital adequacy, credit quality and more. Information around regulatory preparations and concerns as well as credit risks will also be addressed.

Compliance stakeholders are spanning senior management, media, regulators and shareholders, and defining a clear plan and strategy to regularly communicate results tailored to each stakeholder group is imperative. Therefore, banks must embrace modern and innovative strategies for risk assessment—together with an effective governance framework—to address the compliance risk across all relevant domains and align risk assessment with overall business strategy and vision (figure 2). It would likely also be unfair because consumers would incur injury as a result of the loss of rewards, with no ability to avoid the harm and no countervailing benefits that outweigh the injury. Rewards program operators may commit an unfair or deceptive act or practice when they materially reduce the overall value of rewards that consumers have already earned or purchased. Consumers make decisions on whether to open or use a credit card based on the explicit and implicit representations about the value of card benefits and rewards. Furthermore, fine print disclaimers or contract terms stating that rewards program operators have the right to adjust rewards offerings often will not be sufficient to correct consumers’ net impression about the expected value of rewards.