Josh Ballard

For some financial firms, regulatory compliance used to be seen as merely a necessary evil that slows down their traders and limits their ability to turn a profit. Thankfully, that way of thinking is becoming a thing of the past. Companies that embrace compliance not only protect themselves from the watchful eyes of increasingly sharp-toothed regulators, they also see broader benefits across the business.

What Is Financial Regulatory Compliance?

Financial regulatory compliance is an organization’s adherence to rules that are set out by independent regulators. Violating regulatory compliance often results in huge financial fines, dismissal of senior executives and lasting brand damage.

The main objectives of financial regulations typically focus on:

  • Protecting investors/consumers
  • Ensuring markets are fair, efficient, and transparent
  • Reducing systemic risk
  • Reducing financial crime
  • Maintaining consumer confidence in the financial system

Finding Risk Before It Causes Huge Damage

The most obvious reason for employing effective financial regulatory compliance is protecting your business from the results of non-compliant activities. The SEC alone issued fines of US$4.3 billion in 2019, up 10% on the previous year, and that number is likely to rise in 2020 due to the increased risk of financial institutions working in a distributed environment. 

If your firm treats financial regulatory compliance as an after-thought, it’s only a matter of time before a compliance breach happens. Regulators have even deemed that deficiencies in compliance controls, policies and processes are liable for huge financial penalties. In October, Citigroup was awarded a $400 million fine for its failure to, “implement and maintain an enterprise-wide risk management and compliance risk management program.” The firm’s chief risk officer also stepped down following the ruling.

The importance of financial compliance cannot be overstated. Compliance officers need to be backed with leading compliance solutions that enable them to catch bad actors within their organization.

Protecting Your Brand Integrity

Financial regulatory compliance protects your firm from more than just fines. For example, the Wells Fargo cross-selling scandal was first brought to light in 2016 but the fallout continues to rumble on to this day. As well as fines totaling in the billions, two CEOs have departed under mounting pressure and the Federal Reserve has imposed growth restrictions that will only be lifted once Wells Fargo has proven to regulators that it has implemented stronger compliance controls.

Compliance plays a crucial role in protecting the integrity of your brand. It’s no longer a  box-ticking exercise, regulators want financial institutions to take responsibility for their compliance programs to mitigate potential risk. Firms that employ successful compliance controls benefit from less media scrutiny and greater investor confidence.

Identifying Training Opportunities

Traditionally, a compliance team’s job is to root out non-compliant behavior. While that’s still the case, more forward-thinking practitioners are now utilizing technology to take a more proactive approach by informing their internal training programs.

Firms that triangulate compliance training based on actual true positive data often record a decline in true positives. By identifying real-world examples of compliance breaches, organizations can provide more specific training on what is and isn’t acceptable in the workplace. Following such training, firms even report cases of reverse-escalations, with employees pre-emptively self-reporting their own behavior before they are caught by their compliance team. Using technology to assist with training, therefore, leads to a positive impact on company culture.