What is Financial Regulatory Compliance?

Regulatory oversight affects virtually every industry and business space to some degree, but there are a handful of industries that are subject to extremely stringent oversight. This includes the financial sector, which stands alongside the healthcare space as one of the most highly-regulated areas of business.

Regulatory compliance has a significant impact on a company’s operations, policies, procedures, and technology, amongst other things. As a result, it is extremely important that business leaders have a full and accurate understanding of their regulatory compliance burdens. This is critical for avoiding non-compliance and all of the adverse effects that non-compliance can bring. 

What is Regulatory Compliance?

Regulatory compliance refers to the rules, regulations, and requirements that are associated with government and private organizations that perform oversight. In some cases, the organizations performing regulatory oversight focus on a specific industry while others may focus on business types like publicly-traded corporations or companies of a certain size.

Regulatory oversight is just one piece of the equation. The groups that perform this oversight also have the ability to hand down fines and penalties in the case of non-compliance. One example involves nearly $2 billion dollars in fines which were handed down to nearly a dozen major banks after they were found to be using unapproved messaging apps to communicate with clients. In this case, it was the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) that performed regulatory oversight and ultimately issued the $1.8 billion worth of fines to financial institutions including Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, Credit Suisse, Cantor Fitzgerald & Co, UBS Group, Deutsche Bank, Barclays, Cantor, and Nomura Holdings, Inc,

Industry-specific organizations that are involved in regulatory oversight can go beyond typical fines and penalties to ban a company from involvement in organization-hosted events such as conventions, networking events, and professional gatherings. These groups may also revoke their endorsement of a financial institution, resulting in issues with credibility and reputability. In fact, non-compliance can lead to serious problems in the realm of public perception and brand image. This can be especially damaging for a bank or other company in the financial space because trust and reputation are so very important for success. 

What Kinds of Requirements Do You See With Financial Regulatory Compliance? 

Financial regulatory compliance requirements are many and varied. As an industry that sees stringent regulatory oversight, banks, and financial institutions are subject to a wide range of requirements which can include the following measures. 

Reporting and auditing requirements – It is common to see requirements for annual reports on an organization’s business and financial dealings. Auditing is frequently a key aspect of these reports, with the audits being used to prove compliance in many cases.  

Data management, data retention,+ and recordkeeping requirements – Banks and other companies within the financial sector are required to collect, store, manage, and encrypt data in very specific ways. These companies must keep data, such as client communications, messaging data, and financial transaction data for certain timeframes. Failure to retain data and failure to perform proper recordkeeping can result in significant fines and penalties. 

IT and security requirements – Financial institutions are extremely vulnerable when it comes to cybercrime and security threats. As such, banks and other companies in the financial space are commonly required to maintain a minimum level of security and encryption. This has a significant impact on a company’s IT infrastructure, enterprise software platforms, data storage platforms, and other technology-related systems. 

These are just a few of the many requirements that are associated with financial regulatory compliance. Requirements are perpetually changing – a fact that makes it rather challenging to avoid non-compliance. 

What Are Examples of Organizations That Perform Regulatory Oversight for Financial Institutions? 

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are two examples of government organizations that perform regulatory oversight for the financial sector. As mentioned, these organizations recently imposed nearly $2 billion in fines on almost a dozen different banks. 

In addition to groups such as the CFTC and SEC, there are regulatory oversight groups that are linked to specific pieces of legislation like the 2002 Sarbanes-Oxley Act, also known as SOX. Larger, publicly-held companies are required to maintain SOX compliance, which includes the submission of annual financial reports and audits. Non-compliance can lead to more than just monetary fines and penalties. Failure to maintain SOX compliance can result in jail time, making this regulatory compliance burden one that stands out from the pack. 

SOX legislation was passed in the early 2000s, which was a time when there were multiple high-profile scandals in the financial industry. The 2002 Sarbanes-Oxley Act was passed with the intention of promoting greater accountability and improved transparency within the financial sector. Today’s financial institutions are tasked with providing audits and reports that prove that all of their dealings are honest and transparent. SOX legislation affects companies in virtually all industries, including the financial space. 

Avoiding Non-Compliance With Financial Regulatory Compliance Software

Achieving and maintaining regulatory compliance can be challenging, especially in a highly regulated space such as the financial sector. Risk management software systems often include tools for maintaining regulatory compliance. It is also possible to develop a custom enterprise regulatory compliance software platform that is integrated with a company’s existing ERP and CRM systems. 

Third-party integrations are a key component of implementation for these enterprise software platforms. Integration is essential for reporting and auditing purposes. These software systems also include useful dashboards that provide key insights and across-the-board visibility of regulatory compliance-related issues.

A financial regulatory compliance software system brings many benefits to banks and other institutions that are seeking to achieve and maintain regulatory compliance. At iTech, we specialize in the development of innovative regulatory compliance and risk management software solutions. We work with each client to achieve a full understanding of their regulatory compliance challenges and the company’s overall risk management landscape. This insight is used to create the ideal software solution for avoiding non-compliance. Contact iTech today to discuss your financial institution’s regulatory compliance challenges.