Regulatory compliance in financial services?
Regulatory compliance is an essential function every organization needs to complete. Failure to do so could lead to severe legal penalties which include monetary fines and restitution to customers who have suffered a loss due to the organization failing to meet its compliance obligations.
Why it’s important?
Each organization needs to adhere to the relevant laws, regulations, guidelines, and specifications that are relevant to its industry and geographical location.
The scope of regulatory compliance an organization needs to implement depends on the nature of their business and achieving compliance may require adhering to laws and regulations covering everything from human resources to financial practices.
Regulatory compliance is a mandatory function every organization needs to complete. Failure to do so could lead to severe legal penalties which include monetary fines and restitution to customers who have suffered a loss due to the organization failing to meet its compliance obligations.
What is regulatory compliance?
Regulatory compliance is when a corporation follows state, federal, and international laws regarding its operations. It’s one part of the overall compliance structure
Financial services as a sector is particularly highly regulated for a couple of reasons.
First, High Risks that consumers and businesses may suffer harm from aggressive or deceptive business practices.
Second, Reputation because of the history of repeated abuses in this industry. High risk combined with repeated abuses is a recipe for heavy regulation.
Regulatory compliance frameworks now operate throughout the global financial system supervised by (amongst others) the Securities and Exchange Commission in the USA, the Financial Conduct Authority in the UK, and by the European Banking Authority in the EU.
Financial services firms must fulfill the following compliance functions:
- Identification: Identification is very important, to mitigate the risk so the compliance risks facing the company must be identified.
- Prevention: The compliance department must implement controls intended to protect the organization
- Detection: The company Should continuously monitor and generate reports about the effectiveness of the controls
- Resolution: Compliance problems should be resolved as soon as they occur, timely response is key to mitigate the risk
- Advisory: The company must advise and train employees about the rules and controls
A comprehensive policy and compliance management program helps provide clarity of purpose and the implementation of clear policies and guidelines aids in driving initiatives that provide real business value.
When correctly implemented, regulatory compliance can reduce risk, increase efficiency, provide an organization with insights into their business, facilitate better strategic alignment, and enhance the organization’s brand.
