5 Ways That Financial Institutions Can Fall Foul of Regulations

How compliant are your staff?

By Jody Houton

Global financial institutions racked up more than US$36 billion in fines due to non-compliance in 2019 ($10 billion more than 2018), and with increasing numbers of organizations entrusting their staff to trade from home, that figure is likely to be even higher this year.

As investment professionals are now no longer in close proximity, the corporate culture is often not as prevalent, which in turn could lead to a significant decrease in compliant practices and protocol.

It has therefore never been more important for organizations to be able to aggregate and analyze their employee-generated data in order to catch “bad actors” and prevent company-ending crises — before it’s too late.

Staggeringly, 12 of the top global banks were fined for non-compliance violations in 2019. UBS claimed the dubious honor of the world’s worst offender when it received a $5.1 billion fine, which actually exceeded their 2018 net profit of $4.9 billion.

5 Common Fails That Financial Institutions Make — and What They Mean

Bribery and Corruption: A bribe is an inducement or reward offered, promised or provided in order to gain any commercial, contractual, regulatory or personal advantage.

Benchmark Manipulation: Many financial instruments are priced by reference to benchmarks. The actual or attempted manipulation of benchmarks and rates (in order for brokers to influence their trades) can have a serious impact on market confidence and may result in significant losses to investors or distort the real economy. 

Breach of Fiduciary Duty: An example of a breach could be the organization not acting in the best interest of the client, such as not diversifying investments, or ensuring investments are suitable.

Broker/ Trader Errors: Brokers must establish and maintain supervisory procedures to “reasonably manage” the financial or regulatory risks of the business. Failure to do so, or immediately notify a regulatory authority after it becomes aware of a fraud, or intention to commit a fraud, will likely result in huge fines.

Client Confidentiality/ Data Protection: Failure to take appropriate security measures to protect against unauthorized or unlawful processing of personal data is likely to result in fines or imprisonment, or, at the very least, the loss of jobs. Legislation limits the disclosure of non-public personal information, and in some cases requires financial institutions to provide notice of their privacy practices and an opportunity for data subjects to opt out of having their information shared.

Boasting the world’s leading detection rates of true positives, Behavox Compliance helps organizations uncover hidden risks within their internal data, before they cause massive fines and irreparable brand damage. We have more than 80 out-of-the-box algorithms that detect a variety of category risks, including the most common regulatory compliance failures. 

Through the aggregation and analysis of more than 150 data types across email, voice, text, collaboration, videoconferencing, chat apps, and more, we help enterprises catch bad actors before it’s too late.

To see how it all works, click here to schedule a demo.