The Evolving Compliance Landscape: Challenges and Opportunities
In today’s rapidly digitizing world, organizations across industries find themselves navigating an increasingly complex web of IT compliance requirements. As governments and regulatory bodies strive to safeguard data privacy, combat financial crimes, and mitigate environmental risks, the compliance landscape has become a minefield of ever-changing rules and regulations.
For sectors such as financial services, healthcare, and energy, sustainability, and infrastructure (ES&I), the compliance burden has grown exponentially. “The compliance environment, particularly around financial crime compliance, has become exponentially challenging,” notes Eli Morillo, Partner at Guidehouse. “While these industries have always been subject to rigorous compliance standards, the evolving complexities around digital asset security, remote work, environmental regulations, digital payments, and more have added to compliance officers’ burden.”
One prime example is the rise of AI-enabled voice fraud, which has surged so quickly that government agencies have yet to gather comprehensive data on the trend. “Financial crime compliance and monitoring is a particular area of increasing concern as cybercriminals continually evolve their tactics to stay ahead of financial institutions, regulators, and consumers,” Morillo explains.
The need to access specialized expertise for a diverse range of compliance priorities has never been higher, as staffing shortages compete with budget mandates and economic realities. To navigate these complex demands, many organizations are turning to outsourcing as a strategic solution.
Outsourcing Compliance: A Competitive Advantage
A recent survey conducted by Compliance Week and Guidehouse found that of the 26% of financial institutions that reported outsourcing, 74% felt it improved the effectiveness of their compliance program in fighting financial crime. Outsourcing components of a compliance function can allow businesses the ability to maintain their competitive footing while also remaining current with evolving regulatory demands.
“Outsourcing providers can support financial institutions’ compliance and monitoring programs in this complex environment,” Morillo says. “Deep subject matter experts allow large organizations to stay nimble, reacting quickly to changing financial fraud tactics and regulation changes, as well as embracing the best technology and strategies to remain competitive.”
The desire to achieve these outcomes was clear in the Guidehouse and Compliance Week survey, where 65% of outsourcing firms reported doing so to reduce costs while meeting regulatory expectations — the most common reason cited for outsourcing.
The Importance of Specialized Expertise
Navigating the complexities of IT compliance requires a deep understanding of the latest tools, models, and industry-specific regulations. Organizations must be proactive in staying ahead of the challenge, constantly monitoring, assessing, and implementing new financial crime tools and models.
“Financial institution compliance in the modern world requires leveraging ever-evolving tools and models to stay ahead of perpetrators,” Morillo explains. “The adoption of machine learning, for example, is positioned to explode as a method of fighting financial crime, requiring financial institutions to understand and invest in the technology wisely as it becomes more effective and efficient as products mature.”
Another example of the evolving compliance needs involves how financial institutions manage customer risk ratings (CRR). While many still rely on traditional scorecard models, more advanced regression models can reduce subjectivity and provide more consistent risk ratings. Navigating these complex solutions is a challenge that requires specialized expertise.
Regulatory Changes and the Compliance Minefield
In addition to security and financial crime compliance, regulatory changes — ranging from the U.S. Securities and Exchange Commission’s market structure agenda to new and forthcoming regulations meant to address climate change and its related financial risks — present organizations with significant challenges.
One forthcoming set of new regulations for financial institutions is from the Financial Crimes Enforcement Network (FinCEN). FinCEN is expected to announce how it will implement the Corporate Transparency Act (CTA) in the near future. “Despite FinCEN publishing responses to some FAQs in late 2022, many unanswered questions remain regarding the three components of the CTA: Beneficial ownership information (BOI) reporting requirements, BOI Access and Safeguards requirements, and revisions to the 2016 Customer Due Diligence requirements for covered financial institutions,” Morillo notes.
While complete information on the CTA’s most significant impacts on financial institution compliance may not be available until 2024, compliance officers should already be taking action to prepare for the unknown, from establishing internal communications to assessing the organization’s technology needs to comply with developing CTA requirements.
Embracing a Unified Data Management Approach
To navigate the complexities of IT compliance, organizations must adopt a strategic and comprehensive approach to data management. This “Unified Data Management” strategy transcends being just a compliance enabler; it serves as a strategic asset, helping organizations harness compliance as a competitive advantage.
“Our approach to unified data management, steeped in cutting-edge technology and forward-thinking strategies, acts as a robust defense against the chaos,” explains a representative from Data Dynamics. “We don’t merely manage data; we orchestrate it, ensuring its security, governance, availability, and utilization align seamlessly with the ever-evolving digital risks.”
This holistic approach encompasses the organization and structuring of unstructured data, identification and remediation of sensitive information, the establishment of stringent governance focusing on blockchain-based audit logs, and optimization designed to be agile, proactive, and resilient.
Best Practices for Effective IT Compliance Management
As organizations grapple with the mounting challenges of IT compliance, several best practices emerge as crucial for success:
- Continuous Monitoring and Auditing: Implement systems to detect threats and assess compliance status proactively, allowing for prompt remediation.
- Automation and Centralized Policy Management: Leverage automation to streamline routine compliance tasks and maintain consistent policies across the organization.
- Employee Training and Awareness: Cultivate a culture of compliance by educating staff on regulations, security protocols, and their role in upholding IT compliance.
- Third-Party Risk Management: Establish clear criteria to evaluate and monitor the compliance posture of vendors and partners.
- Adaptability and Agility: Stay nimble and responsive to regulatory changes, updating compliance strategies and technologies as needed.
Remember, IT compliance is not a one-time task but an ongoing commitment. By embracing these best practices and partnering with specialized compliance experts, organizations can navigate the complexities of the modern compliance landscape and turn IT compliance into a strategic advantage.
Conclusion: Compliance as a Competitive Edge
In today’s rapidly evolving digital world, IT compliance is no longer merely a checkbox to tick off; it has become a critical strategic imperative. By proactively addressing the complexities of compliance, organizations can not only safeguard themselves against legal, financial, and reputational risks but also leverage compliance as a competitive edge.
As Morillo aptly summarizes, “In an ever-evolving world of financial crime, technology development, and regulatory changes, organizations must proactively manage the complexity of compliance requirements. Doing so while controlling costs is a challenging endeavor. With 40% of financial institutions in the Guidehouse and Compliance Week survey reporting they were either outsourcing or considering outsourcing portions of their compliance function, it’s clear that tapping outside expertise is becoming increasingly common.”
Organizations across industries would be wise to heed this call and embrace a comprehensive, technology-driven approach to IT compliance. By partnering with specialized providers and implementing robust data management strategies, they can navigate the compliance minefield with confidence, ultimately transforming compliance into a powerful tool for innovation, growth, and industry leadership.
To learn more about navigating the complexities of IT compliance, visit https://itfix.org.uk/.
