In recent times, the reputation of the financial sector has taken a major hit with scandal after scandal being brought to public attention. The reports and regulations that follow these scandals affirm what everyone within the industry has expected for a while: the pace of regulatory change is set to increase along with the risk of non-compliance.
The Royal Commission into the Misconduct in the Banking, Superannuation and Financial Services Industry has identified and exposed many examples of major non-compliance across the entire industry in Australia. The exposure of these failures has reinforced and highlighted the need for significant changes in culture and processes across the entire financial sector.
According to Fenergo's recent research, over the last 10 years the APAC region has been hit with AML, KYC and sanction fines in excess of $820 million, with the largest civil penalty in Australian corporate history being issued by the Australian financial regulator, ASTRAC, in June 2018. The magnitude of these recent sanctions highlights the severe consequences of poor compliance, and the need for businesses to seriously address their current obligations and work harder to ensure standards are being met.
In the years following the global financial crisis of 2008, regulations were tightened and scaled up on a global level. Increased regulations were clearly needed to protect customers and increase transparency, the backbone of financial regulation and essential for establishing trust. While necessary, the seemingly never-ending list of regulatory obligations is causing plenty of headaches and leads to a complex and challenging compliance landscape.
For example, Europe's tough new data protection law, the General Data Protection Regulation (GDPR) came into effect in May 2018 and is arguably the most complex regulation the EU has ever implemented. The hard part for businesses is figuring out what it actually means to be compliant amongst the complexity and ambiguity of the regulations; but the increased requirements and increased penalties lead to significantly higher risk if found to be non-compliant.
Added to the volume of regulatory requirements is the evolving nature of the digital landscape and the difficulties this brings to those operating in it and those trying to regulate it. Increasing consumer demand across all sectors leads to a race to digitise all services. PWC's 2017 Digital Banking Survey found that 46% of customers would choose a service that offers a digital channel over one that doesn't; therefore digital transformation is undoubtedly necessary in keeping ahead of the competition, however, organisations must ensure that in the race to implement a digital strategy, they are not compromising their compliance obligations.
These pioneers of digital growth and transformation often find themselves operating in brand new areas where regulations may be confusing or lacking clarity and can very easily lead to unintentional compliance oversights. This rapid increase in regulations makes it impossible to manage different regulation compliance obligations on multiple systems, and instead one streamlined solution is needed for the entire organisation.
Organisations can no longer afford to be complacent when it comes to compliance. Compliance obligations must form the fundamental core of all processes and policies in order to gain back the trust of both their employees and their customers. Rather than seeing compliance as a box ticking activity, action must be taken to improve and manage compliance throughout all processes and policies for better customer outcomes. Industry leaders are embracing regulatory technology (RegTech) and as a result, reducing the time and costs associated with manual processes.
However, an over reliance on these tools and technologies, without proper training for the employees who will ultimately be using them can significantly limit return on investment in this area. 76% of those surveyed for Accenture's 2018 Compliance Risk Study say they perceive a gap between current in-house skills and those required to effectively deploy these innovative tools and technologies.
At Digital First, our industry experts draw from Australian legal and regulatory material covering all Australian jurisdictions to create systems that are easy to implement and ensure you are meeting all compliance obligations. We provide the expert support and advice needed to ensure successful migration to these new tools and technologies, allowing your organisation to keep pace with regulatory change.
Our team includes experts in the fields of case management, compliance and financial remediation technology. If you would like to find out more about how we can help your organisation implement the strategies and technology required to ensure you are fulfilling all compliance obligations, contact us today for a free consultation.