In the face of growing economic uncertainty, the banking industry is undergoing significant transformations in terms of regulations and customer engagement. With a rising number of customers seeking financial assistance and advice, banks must effectively meet the increased demand. Moreover, financial institutions have faced heightened scrutiny and are expected to operate responsibly and ethically.
Consequently, regulatory obligations have become more stringent. Compliance with these regulations is crucial for upholding the integrity of the industry, as non-compliance poses limitations on growth and expansion for financial institutions. And maintaining compliance in banking is costly as well. As per the report, the average cost to maintain compliance can total up to $10000 per employee.
When challenges arise, it’s common to hire new workers, but hiring new workers won’t solve the heart of the problem, which is that regulations will only continue to hinder progress and make it harder for financial institutions to succeed.
Let’s dive into this blog and learn about the new approach where automation can help maintain regulatory compliance in banking.
Understanding Compliance Challenges in Banking Industry
The financial services sector operates within a highly regulated environment, where organizations are obligated to navigate an intricate web of rules and regulations to ensure compliance. However, staying compliant can be a daunting task as regulations undergo frequent updates, necessitating continuous revision of policies and procedures to align with the latest requirements. Some of the compliance challenges faced by banking organizations are-
Massive Amount of Unstructured Data
Banks are currently faced with the challenge of managing vast amounts of unstructured data. This crucial information, necessary for delivering efficient customer experiences and timely document processing, is scattered across various sources such as digital files and physical documents, including KYC documents, emails, legal contracts, and trade agreements.
Compliance teams are currently burdened with the manual task of meticulously searching through these documents, verifying their accuracy, extracting relevant details, and updating the KYC platform.
Keeping Up With Changing Regulatory Environments
This is another compliance challenge in the banking industry to keep up with the changing regulatory environments. Banking service desk agents must ensure that their practices are aligned with the latest regulatory requirements, which can be difficult as these requirements evolve. According to a PwC study of CEOs, 40% of business leaders are concerned that this constant change “increases the risk of their organization not complying with relevant laws and regulations.”
Data Management and Privacy
Banks handle vast amounts of sensitive customer data, making data management and privacy a critical compliance concern. Meeting stringent data protection and privacy regulations, such as GDPR or CCPA, requires robust security measures, data governance frameworks, and appropriate consent management processes.
Anti-Money Laundering (AML)
AML and KYC regulations are designed to prevent money laundering, terrorist financing, and other illicit activities. However, the compliance process involves extensive due diligence, customer verification, and ongoing monitoring, which can be resource-intensive and time-consuming for banks.
Internal Controls and Risk Management
Establishing strong internal controls and risk management processes is essential for effective compliance. Banks must implement comprehensive risk assessment frameworks, internal audit procedures, and compliance monitoring mechanisms to identify and mitigate compliance risks.
Addressing these challenges requires a proactive approach, leveraging technology, automation, and robust compliance frameworks. By investing in compliance resources, implementing effective risk management systems, and promoting a culture of compliance, banks can navigate these challenges and meet regulatory requirements while mitigating compliance risks.
How Automated Regulatory Compliance in Banking Works?
Automation is one such technology that can help banking and financial organizations to make sure they are up to date with the changing requirements. Some of the ways automation can help banking organizations are-
Streamlining Compliance Workflows
RPA in Banking organizations can maintain regulatory compliance and automate manual and repetitive tasks involved in compliance management. This includes document verification, data entry, risk assessments, and compliance reporting. By automating these processes, banks can save time, reduce errors, and improve overall efficiency.
Regulatory Updates and Monitoring
Automation systems or RPA tools can continuously monitor regulatory changes and updates. This ensures that compliance processes and procedures are always up to date with the latest requirements. This way, automated systems can track regulatory changes, extract relevant information, and trigger necessary actions or updates to ensure ongoing compliance.
KYC and AML Compliance
Know Your Customer (KYC)compliance is critical for banks. Automation can assist in automating customer due diligence, identity verification, risk assessments, and ongoing monitoring. By leveraging compliance automation, banks can efficiently manage KYC and AML processes, reducing the risk of non-compliance and enhancing fraud detection capabilities.
Data Management and Reporting
Compliance involves managing vast amounts of data and generating reports for regulatory authorities. Automation systems can streamline data collection, validation, and reporting processes. By incorporating automation in banking compliance, data management, banks can ensure the accuracy, consistency, and timeliness of compliance reporting, reducing the manual effort involved.
Audit and Control
Automation facilitates audit and control processes by providing an automated trail of compliance activities, data access, and system changes. This simplifies the audit process, improves transparency, and ensures compliance with internal and external control requirements.
Risk Management and Monitoring
Automation can assist in automating risk management processes, including risk assessments, risk identification, and risk monitoring. Automated systems can analyze data, detect anomalies, and trigger alerts for potential compliance risks. This enables banks to proactively manage risks, implement mitigating controls, and maintain a robust compliance framework.
Vendor and Third-Party Risk Management
Banks often rely on third-party vendors and partners. Automation can streamline vendor risk management processes, including due diligence, risk assessments, and ongoing monitoring. Automated systems can track vendor compliance and contract renewals and trigger alerts for non-compliance or potential risks.
By leveraging automation in regulatory compliance banking compliance management, financial institutions can improve efficiency, reduce manual errors, ensure regulatory compliance, and effectively manage risks. Compliance automation allows compliance teams to focus on strategic activities, enhances overall compliance posture, and mitigates the potential negative consequences of non-compliance.
How can AutomationEdge Help?
AutomationEdge’s ComplianceEdge is a complete GRC solution that enables enterprises to be compliant with changing regulatory and governance updates. Using AutomationEdge Compliance Edge Solutions, enterprises can-
- Extract forensic grades directly with automated IT audits frameworks
- Get pre-built connectors for ITSM, CMDB, security tools, and application patch management systems
- Connect to any system in banking and insurance companies
- Enable IT audits and risk assessments
- Streamline data upload and alerting needs in compliance reporting
- Generate reminders to important stakeholders through MS Teams, WhatsApp, and email to meet cybersecurity reporting guidelines