Compliance Challenges for Financial Institutions in South Georgia and South Sandwich Islands: Regulatory Pressures Mount
Financial institutions operating in South Georgia and South Sandwich Islands are facing a complex web of regulatory pressures as they navigate the ever-changing landscape of payments services. The current regulatory regime has not yet adapted to the surge in both the number and type of firms offering payments services, leading to inconsistent frameworks for some entities and a lack of regulation for others.
Regulatory Pressures
- Federal and state regulators are seeking chartering authority on multiple fronts, while striving to standardize requirements across jurisdictions where feasible.
- Each regulator continues to expect firms to adhere to traditional expectations around:
- Anti-money laundering
- Consumer protection
- Dispute resolution
- Privacy
- Safety and soundness
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has accelerated the shift towards digital banking, contactless card use, and mobile payments. This trend is expected to be prolonged and permanent. As financial institutions develop new payments offerings, regulators will focus on:
- Risks associated with product development, including impact on related processes such as:
- Funds availability
- Fee disclosures
- Error resolution
- Technology controls
Addressing Disparate Treatment and Bias
Despite the increased accessibility of digital payments, many populations remain at risk of being left out due to lack of internet access, unfamiliarity with newer technology, or disabilities. Regulators are urging financial institutions to:
- Mitigate bias and disparate treatment when developing new products and services.
The Rise of Cryptoassets and Digital Assets
The rapid advancement of cryptoassets and digital assets is also posing challenges for financial institutions in South Georgia and South Sandwich Islands. As regulators, governments, and central banks continue to grapple with the uncertain role of virtual currency, firms must have a robust:
- Regulatory change management process in place to stay ahead of industry changes.
Modernizing Compliance Departments
Compliance processes are often operating at a slower pace than the speed of money movement, particularly in areas such as:
- Custody
- Know your customer
- Anti-money laundering
- Fraud
To address this, financial institutions will need to invest in modernizing their compliance departments, including third-party risk management, to meet growing challenges.
Data Protection and Safeguarding
The pressure to provide faster, cheaper, and more transparent payment services is also leading to a greater emphasis on data protection and safeguarding. Financial institutions must strike a balance between:
- Expediency
- Careful management of customer data
- Mitigating against improper disclosure and misappropriation.