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Standardizing Compliance Processes

standardizing compliance processes

Standardizing compliance processes is necessary to address the complexities, inefficiencies, and pitfalls of current methodologies.

Context & Challenges

Regulatory bodies tend to be siloed and part of a complex value chain responsible for a prolific amount of work. These conditions inherently create opacity and inefficiency, with a dangerous ripple effect.

In the heavily-regulated financial sector, each financial institution maintains its own records on its own ledger system and reports data to the regulatory authorities accordingly with compliance rules. As such, the industry is increasingly siloed, which creates a host of inefficiencies and resulting potential for error and miscommunication.

The regulatory bodies at banks are siloed, and the work is both prolific and part of a complex chain. These conditions create duplication of efforts, lack transparency, and cause inconsistencies that can lead to litigations  with high price tags. Moreover, regulations are frequently updates or revised, causing banks to struggle to keep up.

Given these disconnects, and the sprawling system at hand, compliance systems are not as streamlined as they need to be to be wholly effective and efficient. Despite the massive investment banks feed into compliance and regulatory features. In 2014 alone, it’s estimated that European and US banks paid US$65 billion in regulatory fines and penalties, which represents a 40% increase from the previous year.

Some of the challenges creating this situation are:

—  Compliance is constantly evolving with new risk sources constantly emerging. A narrow focus on centralized governance, risk, and compliance (GRC) processes which prevents banks from countering other emerging compliance risks.

—  Shortage of skilled compliance personnel – most staff traditionally operate in an advisory capacity not on actual risk identification/management. Banks are forced to hire very quickly, leaving insufficient time for robust training.

—  Suboptimal IT strategy — many banks have a tactical workaround approach rather than holistic and strategic – resulting in technical debt.

—  Lack of automation — reliance on labor-intensive, slow, and error-prone manual files, hard copies, and excel spreadsheets

—  Little ability to track the many channels at hand and siloed operations, with no integration between different compliance and monitoring systems

Parties involved:

—  FI Employees
Employees at financial institutions must cooperate with demanding and often confusing compliance processes, which can require them to complete tasks outside their traditional scope of work and put them under a great degree of stress.

—  Customers
Compliance fraud puts customers at risk, leaving sensitive information vulnerable. The demands of compliance processes also redirect bank resources, meaning that they have lest time to tend to customer requests.

 Financial Institutions (FIs)
Financial institutions invest time and money into compliance processes. Much of this investment ultimately ends up being a sunk cost, as the inherent inefficiencies of these processes often result in errors, mishaps, and fees from regulatory bodies.

—  Regulators
Imposing evolving regulation on banks and FIs who do not have the technological infrastructure to keep up and effectively meet compliance requirements can be a frustrating and never-ending task.

Standardizing compliance processes on STRATO Mercata.

Solution Benefits

Standardizing compliance processes on STRATO Mercata drives the following benefits:

—  Save 30%-50% on compliance costs at a product and procedural level

—  Reduce labor costs and time spent on administrative work

—  Build unprecedented security and traceability

—  Create industry standardization

—  Drive sustainable compliance practices, freeing up 30% of risk management programs’ capacity