We often hear the term regulatory compliance associated with financial services. Bankers are penalized for being non-compliant. Non-compliance with certain laws like US FCPA or the European Union’s Anti Money Laundering Directives attracts a huge financial penalty.
In just three years after coming into existence, the various European agencies collected more than 163 billion euros in penalties and fines from different types of businesses.
Regulatory compliance is considered the best investment for the future as Non-compliance can result in hefty fines, penalties, and legal costs. Investing in compliance ensures that a business stays on the right side of the law, avoiding these financial burdens.
Compliance requirements are constantly evolving. Investing in compliance ensures that a business is prepared for future regulatory changes, reducing the risk of disruption to operations.
Regulatory Compliance Definition
In general, regulatory means the direction of activity by a set of laws whereas compliance means abiding by the rules such as laws, standards, policies, etc. Hence, Regulatory Compliance depicts the objective that associations try to accomplish in their endeavours to guarantee that they are aware of and find a way to agree to significant laws, strategies, and guidelines. If the regulations are violated, it results in legal punishments including federal fines. Regulatory and legal compliance plays a vital role in the financial sector.
What are the regulatory compliance requirements?
Regulatory requirements change in every country. The Law of land prevails in every country. Issues occur when a single event during which any employee violates one or more processes or procedures required under the Rules. Hence, continuous training is considered essential for the success of the function.
Overlapping jurisdictional applications where bank offices in various topographies add to the intricacy of regulatory demands. It becomes difficult in terms of compliance with regulatory requirements for financial institutions. European Union realized the need to have a uniform legal structure across the zone and they implemented 20 regulations.
Regulatory Compliance Officer
A regulatory compliance officer is a professional responsible for ensuring that an organization complies with relevant laws, regulations, and policies that apply to its industry. Their primary role is to develop, implement, and enforce compliance programs to mitigate risks and ensure adherence to legal requirements. They also conduct audits, monitor activities, and provide training to employees to ensure compliance across all levels of the organization.
What is regulatory compliance example?
Regtechtimes has created a separate section for international regulations compliances where you can get the information on all the major European Regulations in one place. Some of the examples of regulatory compliance includes Anti Money Laundering Directives (AMLD), FATCA, EMIR, MiFiD to name a few.
What are the key challenges?
The ubiquity of AML scandals is especially surprising given the staggering amount firms spend on compliance efforts—the training programs, hotlines, and other systems designed to prevent and detect violations of AML laws and regulations. A multinational financial institution spends several million dollars a year on compliance. Still, all these assessments deeply underestimate the true costs of compliance, because training and other compliance activities consume thousands of valuable employee hours every year.
However, compliance could be the best investment when it is embedded in the risk management framework. Investment in compliance is considered the best investment as it saves millions of dollars in fines and when embedded in a risk management framework it ensures the going concern of the business.
This is because regulatory reporting is a secondary work with data enrichment, lineage, and reporting which is dealt with manually.
Frequently the absence of a big business-wide technique or a budget for reporting system advancements makes the whole procedure complex and challenging. Along with these complex risk calculations, the scale of regulatory requirements is also a challenge.
AML Challenge
Money laundering poses a big challenge to financial institutions and banks globally. If a bank is unknowingly involved in money laundering, it is still bound to face the consequences.
European states witnessed some very high-profile cases of money laundering such as Danske Bank, Swed Bank, and Deutsche Bank in the last decade. In these scandals not only did the banks face fines but senior bank officials lost their jobs. Shares of these banks witnessed huge selling pressure in the stock markets. Money Laundering scandals wiped out the reputation of these banks completely.
Data Management Challenge
Data management plays an important role in the regulatory landscape. Negligence in data management can have major repercussions on firms. General Data Protection Regulation GDPR is one of the most important enactments which has helped the European Data Authorities to collect huge fines from multinational giant companies like Google, Amazon, Whatsapp, and British Airways.
Generally, firms with poor data management systems are forced to improve their systems at the earliest or face legal action. Also, banks generally find it difficult to report according to the set standards.
Regional Challenges
Every region of operation has its own set of reporting standards. A multinational bank working in different geographies has to face two sets of laws. First is the International Laws like the Foreign Corrupt Practices Act and Second is the local law of the land such as the Prevention of Corruption Act. This makes it very difficult for the banks to meet these requirements. To do this, the banks usually invest a huge amount of time.
Thus such challenges hinder the progress of an organization and if these challenges are not addressed properly then the organizations face serious repercussions.
How do the banks ensure compliance?
It is very important to stay updated with the changing norms and amendments in the laws. Missing out on these changed laws can cause reputational issues for the banks. But the internal staff members can’t work on various tasks. In such situations, it is always a great idea to involve an expert. For Example, the involvement of a Certified Anti-Money Laundering Expert to comply with the AML laws is essential. Sometimes investments in the right technology help to solve complex challenges.
Many emerging technology companies address the legal needs of financial institutions. The set of fintech companies dealing with rules and regulations is becoming popular as Regtech. These companies continuously innovate and come out with new technology solutions to deal with the legal problems of financial institutions.
What is Compliance Monitoring?
Monitoring is a process that ensures that a financial institution is following all the external laws applicable to the organization. The purpose of monitoring is to spot the transactions possessing legal or reputational risk for the organization’s operations or function.
Financial institutions are transforming the role of their compliance departments from that of an adviser to one that puts more emphasis on monitoring. In practice, it means going beyond offering advice on regulatory compliance laws and accepting the ownership of the control framework.
The traditional compliance model was designed when technology was in the nascent stage. It was designed to act as an enforcement arm for the legal function. Compliance organizations are used to promulgate regulatory compliance policies.
However, this model has offered a limited understanding of the underlying risk exposures. This was evident in the fines faced by the financial institutions for the violation of AML Regulations in the last decade.
Regulatory Compliance Training
Regulatory compliance training programs such as CAMP (Certified Anti-Money Laundering Professional) and CAME (Certified Anti-Money Laundering Expert) play a crucial role in equipping professionals with the knowledge and skills needed to combat money laundering effectively. These certifications are designed to provide a comprehensive understanding of anti-money laundering (AML) regulations, laws, and best practices.
CAMP
Certified Anti-Money Laundering Professional offered by Regtechtimes Academy in association with Riskpro is a prestigious certification that equips individuals with the knowledge and skills necessary to combat money laundering effectively. This program is a completely recorded video-based program. This course has global appeal. The program covers various aspects of AML compliance, including risk assessment, regulatory requirements, and detection and prevention techniques.
CAME
On the other hand, CAME (Certified Anti-Money Laundering Expert) offered by Indiaforensic is designed to provide professionals with a comprehensive understanding of AML practices and regulations. This is a cohort-based program. In this program, AML is taught in a virtual classroom environment. It focuses on the practical skills and knowledge required to implement robust AML programs and ensure compliance with relevant laws and regulations. Both CAMP and CAME certifications are highly regarded in the industry and signify a commitment to excellence in AML compliance.
To Summarize, it has now become essential to build an inventory of all the laws and regulations applicable to the financial institution and build and review the compliance regulatory framework.
