Regulatory Compliance in Banking: Challenges & Solutions

What is regulatory compliance? This refers to adhering to the law, regulations, policies, and standards issued by regulatory bodies (e.g., governments, the EU, etc.). It’s a complex process that requires multiple efforts, from teaching good practices across your organisation to implementing software that can help you ensure compliance more accurately. What challenges do you face, and how do you solve them? Find it out in this article.

Table of Contents

• What Is Regulatory Compliance?
• What Challenges Do You Face Regarding Regulatory Compliance?
  • Human Error
  • Changing Regulatory Landscape
  • Conflicting Regulations
• The Takeaway

What Is Regulatory Compliance?

Regulatory compliance is a term coined for all your efforts to abide by the law. It is especially important in finance, where multiple bodies regulate how your organisation should operate. From standards regarding client data management to software security and the contents of your documents – all of these might be regulated by law depending on where you operate.

What Challenges Do You Face Regarding Regulatory Compliance?

It’s not that the law is non-transparent or secret – all organisations know what regulations they need to abide by. Nevertheless, you can often hear about businesses failing to meet regulatory compliance. Why is it so?

It all goes down to the regulatory compliance challenges that most businesses face. What are they, how can they impact your business, and what are the solutions to them?

Human Error

Regulatory compliance in finance is similar to cybersecurity—in both, most problems are caused by internal errors. After all, even the best employee might miss a non-compliant clause in a document or fail to recognise a fraud attempt. How can you prevent this from happening?

The answer is: automation. With the right regulatory compliance software, you can let your platforms take over multiple tasks from your employees, eliminating human error. Naturally, you will still need experts in place (for instance, to correct the issues flagged by your system), but the risk will be significantly lower.

What software/tech can you use?

• AI-powered document processing tools,
• Machine-learning-based engines for fraud detection.

Changing Regulatory Landscape

The second common challenge for regulatory compliance involves the ever changing laws. After all, you don’t have a set of rules you need to follow, but rather, you need to catch up with the latest acts established by your local regulatory bodies. How can you deal with this?

What you need here is flexibility. You may try to predict what regulations will pass and which ones will be discarded, but in the end, you are never 100% sure. This is why:

• your team needs to be flexible,
• your tech stack needs to be flexible,
• your procedures need to be adjusted to implement the provisions of new regulations quickly.

How can you achieve this? Again, there is technology that can help you. If you invest in low-code or no-code technologies, you will be able to develop new apps (for internal use) on the go. This way, you’ll be able to meet new legal requirements much faster while automating the process.

Conflicting Regulations

Another crucial challenge concerns different types of regulatory compliance. After all, some laws were created specifically for the finance industry (e.g., AML laws), while others are general but still apply to your organisation (e.g., GDPR). In consequence, they might have contradictory requirements that make navigating the legal landscape significantly harder. What should you do in such cases?

The best idea is to prepare for all possible scenarios and ask the legislator for clarification. This way, you will be able to stay compliant from the day you receive the legislator’s response.

The Takeaway

Regulatory compliance in financial services requires you to overcome a set of challenges. Many of them can be tackled with the right technology, but it is not always so straightforward. Therefore, invest in innovation, and educate your team and establish a group of specialists who will oversee all the compliance-related aspects of your business operations.

You may also read: Revolutionising Banking through Digital Transformation.

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