Financial Services Compliance

Today's financial services compliance professionals face a variety of requirements to protect consumers, businesses, and the U.S. financial system.

December 29, 2020

Article highlights

About 10 years ago, the U.S. weathered a financial crisis that brought sweeping regulatory changes for the financial services sector. This forever altered how these businesses and organizations operate.

To make matters even more difficult, the regulatory landscape is constantly evolving, making it feel like you’re trying to hit a moving target just to comply.

Before you can understand how to navigate financial services compliance, it might help to take a quick step back and ask, what is regulatory compliance?

In a nutshell, regulatory compliance outlines the state, federal, and international laws and regulations that a business must adhere to relevant to its operations.

When you adopt this definition to view through the lens of the financial services industry, you’re talking about regulations targeting banks, lenders, credit unions, securities dealers, insurance companies, and a host of other financial services businesses.

With that broad perspective, you can dig a little deeper to understand what financial services compliance is and why it’s important.

Financial services compliance is when a business follows the federal and state rules, laws, and regulations that govern financial institutions.

Financial compliance might involve, for example, observing rules set forth by the 1970 Bank Secrecy Act (BSA), commonly known as the Anti-Money Laundering (AML) law. Or perhaps you need to comply with the 2003 Fair and Accurate Credit Transactions Act (FACTA), following the identity theft prevention guidelines.

Because of the financial crisis of 2008, the government instituted these regulations to bolster the integrity and stability of the U.S. financial system.

While this is good, it makes for a complicated and costly compliance landscaping for financial services organizations. Failing to comply means your business could face legal issues, penalties, fines, and damage to their brand’s reputation.

Constantly Changing Regulatory Environment

Managing risk and compliance is a complex, dynamic process with a lot of moving parts.

There are international, federal, state, and local laws and guidelines to adhere to, as well as industry-specific requirements to contend with. And they’re constantly shifting.

This makes it difficult for companies and compliance departments to adjust when it seems like the compliance target is always moving.

Just when you think you’ve got compliance under control, something changes and you’ve got to tweak your efforts. And the stakes are so high. If you can’t adapt, you put your business at risk.

In the midst of all this change, your financial services organization must meet the needs of its customers and provide exceptional products and services that solve their problems.

Still, according to Perficient, “you must respond to regulatory scrutiny, provide accurate reporting on risk exposure, and standardize and automate compliance processes.”

It’s a tall order. But by boosting your organization’s ability to adapt, you will be better positioned to respond to these evolving financial compliance requirements, thus reducing your compliance risk.

Top Issues Facing Financial Compliance

Today’s businesses face a variety of compliance requirements for financial services issues to protect consumers, businesses, and, in general, the U.S. financial system.

Because financial compliance serves everyone’s best interests, organizations need to understand the challenges, issues, and changing regulations.

From cybersecurity and employee misconduct issues to the recently enacted General Data Protection Regulation (GDPR) and Common Reporting Standard (CRS), financial institutions need to bring their A-game when it comes to risk management and compliance.


Data privacy

Due to the sensitive nature of customer data entrusted to financial organization, much of financial compliance aims to keep customer data safe, secure, and private.

Due to the risk of a data breach, how your business processes, stores, and safeguards consumer’s sensitive information requires special handling. Some of this is governed, for example, by regulations such as Sarbanes Oxley (SOX), General Data Protection Regulation (GDPR), and the Payment Card Industry Data Security Standard (PCI-DSS).


Although cybersecurity goes hand in hand with data privacy, it deals with a broader category – preventing and reducing cyber attacks that could cripple your business and erode consumer trust. Hackers inevitably target businesses with access to valuable consumer data.

To protect consumers, financial regulatory compliance laws provide guidance on the financial standards and technology best practices businesses need to implement.

The first step in thwarting cyber attacks involves assessing risks and identifying weaknesses. With this information in hand, you can map out strategies to proactively protect consumer data.

Consumer laws and regulations

In addition to the ever-changing financial compliance landscape, businesses must also stay abreast of consumer laws, such as the recently introduced Home Mortgage Disclosure Act (HMDA).

According to TechFunnel, “financial services compliance seeks to help safeguard consumer data and ensure that data doesn’t fall into the wrong hands.” How? By having financial services organization improve the quality of data reported as its primary objective.

Employee misconduct

Compliance in financial institutions strives to prevent employee misconduct, protecting both consumers and businesses.

These conduct-focused regulations, says TechFunnel, “establish strong controls that include continuous governance, oversight, and monitoring.”


Financial crimes

According to International Compliance Association, the definition of financial crime is a broad, expanding the concept that can include “money laundering, insider dealing or market abuse, corruption, terrorist financing, and fraud or dishonesty crimes.”

Thanks to the sharp increase in regulatory legislation sharp increase and “numerous high profile cases of corporate collapses and damning parliamentary reports,” financial crimes are emerging in areas as diverse as intellectual property fraud, insurance fraud, corruption, and bribery.

Corporate governance

An area that continues to prove challenging for many financial institutions includes corporate governance and the culture of compliance.

According to The National Law Review, “These considerations begin with the board of directors and senior management and trickle down through the institution.” The key to navigating the complex guidance from federal and state regulators?

The Review concludes, “tone at the top, communication, and incentives.”

How to Improve Financial Compliance

Staying ahead of the financial compliance curve seems to be the industry mantra. But how can you make this a reality?

Prevention first

To operate with compliance excellence, your first step starts with the preventive measure of establishing solid policies and procedures from the get-go. In a nutshell, effective policies and procedures ward off problems before they even arise.

They work together to guide your organization, decrease liability risks, and bind your company to industry best practices. By having good policies – and training employees to these policies – you boost accountability in your organization.

Developing a culture of accountability and compliance takes intentional effort and starts with top-down buy-in. But doing so helps employees be more productive, creative, and able to contribute to larger company goals. It also allows employees to take ownership of their work and build trust between team members at all levels of the company.


Monitoring compliance

Effectively monitoring your compliance efforts is not a one-and-done approach. You must always be on guard through continuous compliance monitoring. This ensures you are aware of any issues you need to handle and you can correct these issues when they arise.

Compliance oversight

At this point, you would probably be hard-pressed to find anyone in your organization who fails to see the need for a well-run compliance program. But with the complexity of the requirements and the ever-changing regulatory landscape, it’s hard to stay on top of everything.

That’s why many businesses are putting a Corporate Compliance Officer (CCO) at the helm of compliance rather than just a figurehead with no real power. The critical compliance responsibilities should fall to an individual dedicated to overseeing compliance for the organization.

Integrated risk and compliance solutions

When it comes to financial compliance, you really need to think about it holistically rather than from a silo mentality. Compliance touches every area of your business and involves every employee – it’s not relegated to one committee, task force, or department. Because of this, your business needs solutions that help multiple aspects of your business.

Getting Started

Navigating the labyrinth of financial services compliance can seem daunting. That’s why a compliance management software like PowerDMS helps you get control of your expanding, interconnected web of compliance documents and training.

Our software gives you a powerful tool to help monitor and track compliance with key policies and training and simplify the process. Plus, it gives you the ability to quickly adapt and distribute changes to your employees – exactly what you need in addressing the constantly changing financial compliance landscape.

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