Financial Crime World

Compliance Functions in Banks: Trends, Challenges, and Opportunities

Introduction

The banking sector is facing increasing regulatory scrutiny, driving the need for robust compliance functions. This article explores current trends, areas of improvement, and opportunities for banks to enhance their compliance programs.

Compliance Headcount

In recent years, compliance staff numbers have risen in response to intensifying regulatory oversight. Larger banks operating across multiple jurisdictions are more likely to invest heavily in dedicated compliance headcount, reflecting the complexity of their operations.

  • Regulatory scrutiny: The rise in compliance staff is largely due to increasing regulatory pressure, with banks needing to demonstrate a strong commitment to compliance.
  • Jurisdictional complexity: Banks operating across multiple jurisdictions face unique compliance challenges, requiring specialized expertise and resources.

The banking sector’s approach to compliance has undergone significant changes. Some key trends include:

  • Digitization: The adoption of digital technologies is driving efficiency gains in compliance functions, enabling banks to streamline processes and improve accuracy.
  • Regulatory surveillance: Banks under less regulatory scrutiny tend to allocate fewer resources to conduct and customer protection.

Pressure Testing

To ensure the effectiveness and efficiency of their compliance programs, banks should regularly subject them to pressure testing. This process involves evaluating the robustness of compliance functions in response to various scenarios.

  • Effectiveness: Pressure testing helps identify areas where compliance programs may be lacking or need improvement.
  • Efficiency: By streamlining processes and eliminating unnecessary steps, banks can reduce the burden on compliance staff and improve overall efficiency.

Agile Working

Compliance functions can benefit from adopting agile ways of working. This approach enables compliance teams to:

  • Gain speed: Agile methodologies allow compliance teams to respond quickly to changing regulatory requirements or internal process updates.
  • Maintain effectiveness: By prioritizing tasks and focusing on high-impact activities, compliance teams can maintain their independence while delivering value.

Staying Ahead

To ensure their compliance functions remain fit for the future, banks should stay up-to-date with emerging trends and regulatory developments. Some key topics that will shape the compliance landscape over the next three years include:

  • Efficiency: Banks must continue to streamline processes and improve operational efficiency.
  • Data availability: The increasing reliance on data-driven decision-making requires banks to ensure they have access to high-quality, relevant data.
  • Regulatory changes: Banks must remain vigilant in responding to regulatory updates and changes.
  • Availability of qualified employees: The demand for skilled compliance professionals is likely to increase, requiring banks to invest in employee development programs.
  • Comprehensive risk assessment and oversight: Banks should prioritize comprehensive risk assessment and oversight to ensure they are adequately managing risks.

Conclusion

In conclusion, the banking sector’s compliance functions face numerous challenges and opportunities. By staying ahead of emerging trends, adopting agile ways of working, and prioritizing pressure testing, banks can enhance their compliance programs and maintain a strong commitment to regulatory requirements.