Compliance and Regulatory Challenges in Wealth Private Banking
April 28, 2023
In the globalised world of wealth management, compliance and regulation have never been easier. Banks and other wealth management institutions and disruptors have been subject to a deluge of new regulations, more scrutiny, and harsher penalties for violations.
The sudden arrival of the COVID-19 variant has again dashed hopes of a greater normalisation of travel, leisure, and business connectivity in the near term. Accordingly, challenged compliance and legal teams and advisors will need to continue to manage teams and oversee colleagues working in disparate locations rather than in one office environment. Concerns over KYC (Know Your Customer), AML (Anti Money Laundering), and Source of Wealth only become more acute, while fines are becoming more prevalent in Asia, and the Culture & Conduct revolution is soon to get underway.
The private banking world has many compliance-related challenges. The order of importance in the compliance and AML departments of private banks is the one that is most important in handling reporting and control. Compliance must be involved in every step of the financial environment, end to end, to make sure that the right decision is made before the release of a product. Otherwise, the bank is likely to be sorry later and must do endless remediation work every time. Approval, escalation, and hierarchy must be faster and more dynamic [2].
The main reason for compliance and regulatory challenges in Wealth Private Banking:
Remote working and Hybrid work practice
Major decisions on the new work environment are being made as the banking industry begins to resume normalcy again. As a result of the epidemic, many workers started working from home, forcing banks to embrace digital. Since most of this trial proved successful, many businesses are now thinking about making hybrid or flexible arrangements permanent.
Remote work, however, introduces an extra level of compliance complexity for banks. Organizations have had to adapt quickly to evolving restrictions and revise internal company processes and procedures to include remote work. Making work-from-home a permanent option will require a full policy review, particularly regarding safeguarding sensitive information away from the office.
Rapidly Changing Regulations
The current regulatory requirements, as well as related procedures and controls, should be closely monitored by banking compliance officers. Numerous policy makers are required to provide volumes of data and evidence for regulations. Additionally, you must be able to put that knowledge to use by updating the applicable organisational processes, controls, and policies.
The regulatory pressure is accelerating with global and local initiatives seeking transparency, customer protection, prevention of financial crime, market stability and tax compliance. Wealth management companies are investing more money in projects to assure compliance with the new standards by the deadlines set, to build the necessary skills to meet these challenges, and to adapt or introduce new compliant goods and services to deal with this constantly shifting regulatory environment.
Compliance Costs
Banking compliance is a huge expense. Simply “keeping the lights on” requires enormous sums – and the cost of keeping up with accelerating regulatory change rachets up that amount. According to a recent survey, operating costs spent on compliance have risen by over 60 percent for retail and corporate banks over the last eight years.
Reducing compliance costs comes down to your ability to increase the effectiveness and efficiency of the compliance management function. Invest in the right technology to automate processes. Automation not only drives down operating costs; it minimizes your risk of expensive fines from non-compliance.
Digital Transformation in banking sector
The pandemic accelerated digital transformation within the banking sector. Digital transformation remained an important trend in banking in 2021. Like its impact on other business domains, technology is gradually reshaping the financial services industry in every aspect. However, the industry has a long way to go, and banks are still dipping their toes in the digital water, with 27% only launching a digital transformation strategy in 2021.
Consumers are now embracing digital platforms to access many products and services, which has pushed technology to the forefront of the strategic agenda for many organizations. Regulators are struggling to keep up with the pace of digitization, especially around areas of machine learning, artificial intelligence (AI), and big-data analytics.
Fraud and financial crime
In the present economic cycle, regulators will concentrate on risks that have increased, such as fraud, insider threat, conflicts of interest, KYC, CDD, sanctions, and AML. Be ready for potential wrongdoing with improved data analytics and real-time monitoring. Build strong linkages between the teams that deal with fraud, cybersecurity, and financial crimes inside the three lines of defense globally. At the state and federal levels, new charters for cryptocurrencies and digital assets are being suggested; these should be considered when creating compliance programmes.
Cybercrime, fraud, and corruption continue to threaten the national economy and financial systems worldwide. The new and improved AML is intended to provide more tools and encourage greater proactivity in detecting and deterring money laundering and the financing of terrorism. Also, it ensures that non-federally insured credit unions are no longer exempt from AML regulations.
How Brickendon can help?
Improve your compliance readiness by automating compliance processes: Brickendon can help to automate the compliance management simplifies the compliance process and reduces errors that may occur with manual management. Workflow automation for compliance involves compliance software to automate tasks and controls. This streamlines business processes and allows tracking all compliance activities in one place, avoiding using multiple sources such as spreadsheets, word documents, and web browser bookmarks.
Identify the regulations that relevant to your company: Brickendon can help in locating every legal requirement that your company must abide by and carry out in accordance with established standards. Identify the requirements in each regulation that are relevant to the organization and consider plans on how to implement these mandates.
Provide regular support and compliance training to all employees: Compliance with regulations is everyone’s responsibility. So, you must make sure that your team follows the current compliance regulations. Employees who lack the knowledge necessary to carry out their responsibilities in compliance with legal requirements run the risk of unwittingly breaching the law.
Help to improve your regulatory compliance: Brickendon can assist in identifying the precise requirements, enhancing regulatory compliance, and locating corporate laws and regulations. Regulators frequently issue and amend laws and regulations to respond to emerging risks and consolidate existing legislation.
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