Financial institutions around the world are subjected to strict scrutiny to combat money laundering, tax evasion, fraud, terrorist financing, and other illegal activities. Complying with the standards set by regulatory bodies comes with its own costs, a burden that financial firms have to shoulder. It’s estimated that banks, insurance companies, brokerages, remittance firms, and other types of businesses that make up the financial sector spend more than USD 180 billion on compliance costs alone.
Despite this large spending, many establishments still fall short of meeting the guidelines set by regulatory bodies. This also comes with hefty fines. In just 10 years, financial institutions with local and international operations have accumulated a total of USD 36 billion in sanctions and fines due to non-compliance. In addition to this, brands also incur reputational damage due to getting involved in financial crimes and scandals.
This begs the question: what steps can your financial firm take to reduce the burden of regulatory reporting? At the same time, how can your company effectively protect itself from being used by criminals for illegal financial activities? Here are a few practical suggestions that can help your financial institution stay on top of the rules set by regulatory bodies:
Identify the Company’s Top Priorities for Regulatory Reporting
The first step in improving your company’s regulatory reporting process is to set goals and see how the current system you are using measures against these touchstones. Doing so will help you identify strengths and weaknesses in the process as well as choke points that should be resolved. If you’re planning on upgrading your regulatory reporting software or partnering with a managed IT services provider, this step can also help you create a detailed list of requirements that your new solution should be able to offer.
Examples of common improvements that can raise your establishment’s regulatory reporting capabilities include:
- A centralized data management system that can be readily accessed and used as a source for internal and external reporting
- An automated end-to-end reporting system that takes care of everything from gathering data to submitting reports
- Functionalities that allow easy visualization, prioritization, and organization of enterprise-level data, such as a depository for data quality rules.
Does your current regulatory reporting software have these tools and functions? If not, then it might be time to consider a more comprehensive and customizable solution, one that can effectively reduce the amount of work that your compliance team needs to shoulder.
Invest in Future-Proof Compliance Solutions
Financial crimes continue to evolve in an effort to foil the anti-crime measures implemented by law enforcement agencies, regulatory bodies, and financial establishments. To keep up with these changes and to remain effective in their mission, regulatory bodies are continually refining and updating the compliance rules that financial firms have to follow. This causes the cost of compliance to balloon year after year.
More than half of an average company’s compliance expenses goes to labor costs. This is because many firms find it necessary to hire specialized staff members or an IT consulting firm to ensure their company’s compliance every time regulatory bodies roll out new rules. The other half of the compliance budget is directed to technologies that can make the process more efficient.
However, many financial firms are reluctant to spend on new software for regulatory reporting, as this activity does not earn revenue for the company. At the same time, because compliance rules change every now and then, some companies are also not too keen on acquiring an expensive software that will go obsolete or need paid updates in the next few years or so.
What they may not know is that there are comprehensive reporting solutions out in the market today that automatically integrate the updated rules implemented by regulatory bodies. A solution like this can help ensure the integrity and timeliness of the reports generated by a financial establishment. It can also eliminate the need to hire specialized personnel every time regulatory bodies roll out new requirements. Moreover, because the new solution is updated automatically, companies can save on cybersecurity and what they would otherwise spend on new software or expensive updates.
In addition to savings, enterprise-wide regulatory reporting solutions offer a wide range of functionalities and customization options. This means that users can modify these solutions to suit the particular needs of their operation.
The Importance of Regulatory Reporting
Investing in regulatory reporting technologies has benefits that go beyond ensuring your company’s compliance. It’s also a solid step in protecting your company from the negative impacts of financial crime, like substantial fines and damages to one’s brand and integrity. In addition, providing your compliance team with the right tools and services will reduce the number of menial tasks that they need to accomplish. This, in turn, gives them more time and resources to ensure the quality of the reports that are submitted to regulatory bodies.