In the world of financial regulations, ‘bad actors’ refer to individuals or companies engaging in illegal, unethical, or fraudulent activities. They do it to gain an unfair advantage in the financial system. Individuals or organizations don’t allow these ‘bad actors' to participate in certain regulated processes.
Non-compliance is expensive.
Over the last 10 years, financial institutions across the world have been fined a monumental €27 billion for lapses and non-compliance with anti-money laundering (AML), know-your-customer (KYC), and sanctions-related fines (data provided by Fenergo – a leading vendor offering digital regulatory and client lifecycle management software).
In this article, you'll learn how to avoid issues like these.
We'll cover the following aspects:
You're surely aware that financial regulations are a critical aspect of the banking and financial industry.
We'll show you how to avoid failing to comply with these regulations, which can result in severe consequences for your company, such as hefty fines and loss of reputation.
While we expected the regulations to ease over the coming years, we see instances where the fines' cost is shooting up.
It happens in both mature regulatory markets (such as Europe, the UK, etc.) and across less mature ones (e.g. APAC).
We’ve seen the enhancement of existing regulations (FinCEN Final Rule in the US, 5th EU Money Laundering Directive, and MiFID II in Europe). We've also seen the introduction of new regulations such as MiFID II and data privacy laws like GDPR. Furthermore, we’re witnessing more proactive enforcement of regulatory rules across Australia, Hong Kong, and Singapore.
Dirty money costs financial institutions and their clients alike.
The article on financial safety The Cost of Dirty Money by Bloomberg explicitly shows us how much the limited oversight or faulty procedures cost.
$1.9 billion paid by a bank is pretty hurtful.
The bank had to pay the fine for failing to control over $670 billion worth of wire transfers from Mexico and over $9.4 billion in purchases in the U.S. These funds were used to create a system for laundering drug cartels’ money.
That’s not all.
$237 million is the overall fine that another major institution had to pay because it didn’t track its subsidiary well enough.
The subsidiary in question processed over $8.8 billion worth of transactions from 2007 to 2012. Almost no oversight was detected. That forced the Federal Deposit Insurance Corporation and the California Department of Business Oversight to administer a huge punishment.
Still not enough?
These real-life examples give us a good idea of what happens if banks don’t invest in systems covering clients’ deposits and don’t allow for internal transparency.
CSHARK helps to provide an increased protection for financial institutions striving to do business in an ever-connected but highly regulated world.
We partner with the industry-leading provider of regulatory and digital technologies for financial institutions – Fenergo.
They help financial institutions comply with local and global regulations, protecting their reputation, digitalizing operations, and generating significant efficiencies and cost-saving.
Despite a global crackdown that has rained upon banks as a direct implication of the 2008 crisis, solutions of Fenergo help financial firms improve operational efficiencies that create optimized client experiences.
The company offers the Regulatory Rules Engine. It's an intelligent solution that provides an out-of-the-box, easily configured repository of rules. Financial institutions can utilize them to future-proof their business against evolving regulatory and operational requirements.
Fenergo also operates global regulatory compliance forums. They consist of senior regulatory representatives of its global client base, culminating a pool of 20,000+ compliance professionals.
These forums have direct input into the Regulatory Roadmap. It helps financial institutions to manage regulatory change as business as usual. Furthermore, it ensures they achieve compliance ahead of the regulator's deadline.
And what happens when the roadmap is ready?
The company translates it into codified rules for the software, ensuring regulatory currency for all clients. They effectively give the clients time to get ahead of upcoming implementation deadlines, without additional licensing or development costs.
A global community of clients working together to ensure safety is unique in itself.
In short, Fenergo’s solutions offer:
An efficient client onboarding and managing through the whole lifecycle can save not only banks’ and clients’ money but also the image. To achieve this, automation should be in place.
To keep on top of an ever-evolving regulatory landscape where new regs are introduced every year and existing regulations undergo constant updating, financial institutions need to automate processes as much as they can. This will free up resources to focus on higher-risk clients and tasks to human oversight.
Financial institutions should aim to eliminate regulatory interpretation and introduce consistency into the regulatory compliance decision-making process (Rules Engine by Fenergo can do that).
Future-proofing the organization will also help, by collaborating with other financial institutions and ensuring that the company in question meets regulatory deadlines on time, every time (compliance by design).
After all, the area of compliance is non-competitive.
If you're representing a bank or a financial institution, it's essential for you to invest in compliance programs, including technology and risk management.
That will ensure your organization remains compliant with all relevant regulations. By doing so, you can safeguard its reputation, protect your customers, and maintain a stable financial system.
Fenergo’s products and CSHARK’s collaboration shows that a united front can (and will) make a difference for financial institutions.
Remember, the cost of non-compliance is far greater than the cost of compliance.
If you want to drive change in your company – feel free to contact us.