The Biggest Regulatory Concerns in the Financial Sector

The Biggest Regulatory Concerns in the Financial Sector

Financial institutions of every size have both a legal and moral duty to adhere to various regulations, which are becoming increasingly complex.

Complying to the various high standards can be a challenging task, but there will be serious repercussions should an organization fail to do so. For example, they might be subject to a hefty fine and experience reputational damage.

To gain an understanding of the difficulties, read the biggest regulatory concerns in the financial sector.

The Evolving Regulatory Scope

At present, there are more than 750 regulatory bodies across the world that are governing institutions of all sizes. Financial companies will be unable to escape adhering to regulations. For a company to be compliant, they must have an in-depth understanding of each regulation, which can be a major challenge. A perfect example is the Dodd-Frank Act, which has 2,3000 pages of regulations.

Risk Management

Most established financial firms have embarked on manual processes to calculate various risks throughout the decades. With new threats emerging, many companies will struggle to manage risk, which could impact their security, legal compliance, and reputation.

Automation services can help firms to improve their surveillance and maintain greater control of their processes. Every financial business should aim to track, timestamp, and then recall data points, which can improve transparency and compliance.

KYC Compliance

Unfortunately, both money laundering and terrorist financing have become a big concern for the financial sector. It doesn’t matter if a bank is unaware of money laundering or terrorist activity, they will face major repercussions from various regulators. It is essential for every financial firm to understand the importance of KYC compliance and how they can meet their requirements. For instance, they could invest in an online identity verification process.

Record Standards

Every financial firm must record information for regulatory compliance. Record standards will vary for different countries, which is tough for international institutions. For example, international banks will need to adhere to International Financial Reporting Standards and the US Generally Accepted Accounting Principles. Companies must aim to streamline methods to merge data and adhere to various recording standards.

Data Management Capabilities

Some financial companies may need to hold various client information for many years. As a result, this can place great pressure on its employees, as they will need to manage the data, which they might need to provide to a regulator when requested. Inadequate data management can have serious consequences for a firm, especially if they have embarked on little or poor data management processes. Companies may need to regularly review their data management capabilities to comply with evolving regulations.


Regulation is a major challenge for both large and small financial institutions. In addition to identifying the various regulations they must adhere to each day, they will need to proactively streamline their operations and processes to improve compliance. To do so, they should invest in various technologies and simplify many internal processes to avoid legal action, large fines, and reputational damage.