The financial sector is broad, covering both commercial and retail services to both financial institutions and the public. Banks, investment companies, insurance companies, and real estate firms are all part of the financial sector and have a major impact on the economy.
Whether your company is considered a part of the financial sector, or they are your customers or partners, it’s imperative that you know the ins and outs of regulations and tech implications that govern the sector.
In 2002, the Sarbanes-Oxley Act (SOX) aimed to improve transparency in the financial sector; and in 2010, the passage of the Dodd-Frank Act imposed (a mere) 2,300 pages of regulations on financial institutions. These major legislative acts are just two of the many state and federal regulations with which financial companies must comply.
Where does compliance begin?
Regulatory compliance in the financial sector begins with three major steps:
- Knowing and keeping up to date with changes and additions to regulations
- Guarding against cyber attacks (cyber security) and threats to consumer privacy
- Instituting new and competitive technologies (dubbed fintech and regtech) without jeopardizing compliance.
In a recent survey by Crowe, financial executives identified cyber security as their greatest concern. However, regulators find that credit issues spark the most “matters requiring attention” (MRA) designations.
How can financial institutions keep compliant?
Keeping up to date with regulations requires an internal culture shift.
Every employee of your company must be aware of the key financial sector regulations that impact your day-to-day operations and relationships with customers and other businesses. Moreover, employees must learn how easy violations can happen in our current climate of interconnectivity and relaxed views about what can and cannot be shared online. Make sure that:
- Your compliance processes, ethics, and procedures for reporting issues are uniform throughout the organization, including marketing and sales.
- You conduct independent internal audits periodically.
- You meet all reporting requirements in a timely and efficient manner.
Protecting the security and privacy of data requires that:
- You store data in a secure offsite location, with encryption as needed.
- You have reliable data recovery procedures.
- You avoid conflicts of interest; for example, if you use consumer data in ways the consumer could not reasonably anticipate.
- You anticipate the effect of European regulations, such as the EU’s General Data Protection Regulation (GDPR), on US standards for data security and privacy.
Fintech and regtech are important technologies; however, they can jeopardize compliance. Fintech—such as mobile banking—provides new methods of delivering financial services. Regtech tools monitor transactions and alert financial institutions to possible AML and KYC violations. If you use these technologies, ensure that:
- You have assurances of regulatory compliance by any third-party or vendor technology firms, including appropriate metrics and oversight. (This is often where data security and compliance breakdowns occur). Confidence in a third-party or vendor firm is especially important in regard to anti-money laundering (AML) and know-your-customer (KYC) regulations, as violations can trigger hefty fines.
- You pay close attention to avoiding data breaches, as each addition to technology opens up new routes for hackers and new vulnerabilities. Data breaches are not only expensive, they also undermine a financial institution’s reputation.
How does Future Link IT help with compliance?
As a provider of offsite storage, backup, firewalls, centralized reporting, recovery, and other services, it’s our business to keep up with regulatory changes. Just as important, FutureLink is a vendor you can trust: we make sure we’re compliant, keeping your data safe and protected. Need help bringing your system into compliance? Schedule a call with one of our experts.