The Role of Compliance in Financial Services

Compliance with regulatory requirements in the financial services industry can be challenging enough without dealing with inefficient tools that make your job even harder. Fortunately, financial services compliance software can help companies stay compliant with state and federal rules while saving time, money, and frustration by ensuring they have the information and resources they need right at their fingertips.

What Is the Role of Compliance?

Compliance is an industry term for all rules and regulations that govern how financial institutions conduct business. If you want to break it down even further, it’s mainly a fancy way of saying the law. And not just any old law: we’re talking federal, state, and local laws—and these include laws that cover topics like securities and banking. Now that we’ve established what compliance refers to, let’s talk about how these rules actually relate to businesses.

Why Is It So Important?

By now, everyone knows compliance is more than just a buzzword. But for those who are still on the fence about its value, consider these statistics: The Financial Industry Regulatory Authority (FINRA) fined investment firms $8 billion in 2015, up from $5.7 billion just five years earlier.

That fine total doesn’t even include similar sanctions levied by other federal agencies like The Securities and Exchange Commission (SEC), which recently charged Wells Fargo with defrauding investors to boost their bottom line. So naturally, the last thing any financial institution wants is to add themselves to the list of non-compliant offenders.

Regulatory Frameworks for Compliance

Many regulatory frameworks exist for financial services compliance, including Know Your Customer (KYC), Anti-Money Laundering (AML), and others. Knowing your customer regulation helps prevent financial institutions from inadvertently facilitating money laundering or other illicit activity. Financial institutions must identify who their customers are and track them over time so that suspicious transactions can be flagged.

The US Treasury Department has set forth strict guidelines for how financial institutions must abide by these regulations to avoid legal consequences, ranging from steep fines to jail time. Regulatory agencies also oversee AML rules, requiring companies to monitor activity across their platforms and flag suspicious behavior like large deposits or withdrawals.

Financial Services Compliance Software

Most financial services companies use some type of software to monitor compliance with regulations such as Know Your Customer (KYC) and Anti-Money Laundering (AML). However, because regulations differ from country to country, there’s no one solution that works for everyone. If you operate in multiple countries and industries, chances are your business will need multiple solutions tailored to various aspects of your operations.

Specific compliance needs will vary by industry, but most businesses need some combination of risk assessment, transaction monitoring, and reporting tools. Extensive financial services compliance software such as Verint can help ensure that businesses know any regulatory changes that might affect their day-to-day operations.

This topic can be a bit confusing, but there are many tools that aim to streamline and standardize regulatory compliance in financial services. As always, it’s important to do your due diligence when picking out a new product or service.