Skip to main content

(7 min read)

As a leader of a critical business function, you’re always curious to find out how your peer firms are faring in the current environment.

That’s not just your competitive drive talking. Learning about the issues your peers face helps to benchmark your own performance and priorities.  

Below are three hot button issues that many companies in the financial services industry are facing:

1) Increasing Regulation: More Firms Turn to RegTech Rather Than Add Headcount

As any business operating in finserv knows, the regulatory burden has exploded since 2008. There are more rules than ever, imposing more obligations than ever, and changing more frequently than ever. A massive increase in the cost of compliance has accompanied that growth, to the profitability-driven frustration of firms industry-wide.

How are your peers handling regulatory growth?

By and large, they’re either reprioritizing compliance above other, potentially more profitable activities, or wisely investing in compliance infrastructure on the front-end, that will save them gobs of time and money on the back-end.

Most generally prefer investment over taking scarce resources away from profit-making activities, provided the investment generates measurable returns.

Unfortunately, hiring extra compliance staff and/or outside consultants and attorneys often feels like sunken cost rather than a strategic expenditure. Extra bodies do not reduce the regulatory load. They just make it easier to lift for a while, but in the meantime bleed the additional salaries out of their profitability.

In contrast, other peer firms have invested in RegTech solutions with an eye to counteracting regulatory complexity.

Instead of throwing more humans at the problem, these firms have opted to leverage technology to take over some of the more time-intensive and error-prone compliance tasks from existing employees.

RegTech offers the promise of streamlining compliance tasks by reading, parsing, and summarizing millions of pages of regulatory text, thereby unleashing existing human capital for more productive tasks.

2) Data Privacy and Security Concerns Lead to Compliance “Overkill”

It’s not just you — your peers also stay awake nights worrying about data privacy and security, as nobody wants to be next on the list of notable data breaches alongside companies like Experian, Facebook, or Starwood Hotels.

As technology fundamentally alters how financial markets operate, firms must confront growing risks of digital security lapses, malicious intrusions, and data theft, to name just a few “cyber” nightmares.

Unfortunately, the default regulatory response to evolving threats is to issue more regulations, many of which overreach or inflict collateral costs greater than the harm regulators seek to prevent.

Your peers, in turn, have their own default response to data privacy and security rules.

First, quite sensibly, they hire experts who understand the digital challenges their firms face and who have a view to addressing those challenges cost-effectively.

This typically entails developing rock-solid procedures and digital controls detailing the who/what/when/where/why/how of ensuring data privacy and responding to data breaches.

Of course, that’s only half the battle. It’s also crucial to match up the technical task of maintaining data privacy and security with the latest regulations.

To that end, firms industry-wide try to stay current on the very latest regulations and rulemakings so as to anticipate how regulators will respond to the choices they make for protecting client data.

Rather than navigate multiple rule sets in various jurisdictions, some of your peers opt to embrace a firm-wide compliance program that meets the most stringent standards available, such as GDPR, even if little or none of their business transacts in jurisdictions where those standards apply.

Still, your peers share your gut sense that something’s amiss when “going overboard” is the most efficient and effective strategy for data privacy and security compliance.

We share that intuition, which is why at Ascent we’re hard at work developing solutions that analyze and systematize regulatory obligations so as to make it possible for your firm to take advantage of the regulations applicable where you actually do business, instead of laboring under stricter regulations than necessary.

3) Know Your Customer (KYC) Point Solutions Help Deter Bad Actors

Anti-money laundering (AML) and anti-bribery statutes have made KYC part of the financial industry’s primary lexicon.

As capital flows become ever-more global and intertwined, firms run a growing risk of falling prey to bad actors seeking to exploit lax KYC practices. Fortunately, this is an area in which RegTech innovations that specialize exclusively in KYC solutions have truly shined.

Today, there are multiple, high-quality KYC vendors drawing on massive databases of information to explore and uncover beneficial owners, suspect transaction histories, and opaque ownership structures.

Nevertheless, it’s important to pick KYC vendors carefully. Your peer firms stay current with emerging “best practices” and AML trends in their respective market niches, to ensure they have the best compliance vendor for their needs.

When in doubt, they can always consider it a safe bet to ask their relevant regulator for a recommendation.

For example, FINRA recommends Business Information Group for background checks of member firm employees in NTM 15-05, which could also double as a great piece of your KYC process.  

Ascent supports KYC compliance programs by making it easy for those vendors and their clients (that is, you!) to stay on top of the latest KYC obligations in multiple jurisdictions, which is a critical part of choosing the best fit for your KYC solutions.

By automating and streamlining the task of staying current on changes to KYC rules, we help to make sure not just that firms avoid onboarding suspect accounts, but also that even if a bad actor slips through the net, firms can demonstrate to investigators that it happened despite their total compliance with applicable regulations, rather than because of a total compliance failure.


Enjoy this article? Subscribe to receive helpful content designed to help you win at compliance.