Financial Crime World

Regulatory Outlook: 2022’s Top Risks and Challenges for Law Enforcement

The financial landscape is set to undergo significant changes in the coming year, with law enforcement agencies facing a range of new challenges and risks. From the continued impact of the pandemic to the evolving regulatory environment, here are the top issues that will shape the industry in 2022.

Overdraft Fees and “Junk” Fees

The Consumer Financial Protection Bureau (CFPB) is stepping up its scrutiny of overdraft fees and other charges imposed by banks on consumers. Regulators are concerned that these fees can make it difficult for consumers to shop around for credit, potentially exacerbating financial inequality.

  • The CFPB’s focus on overdraft fees is aimed at ensuring that consumers have access to fair and transparent banking services.
  • Regulators will be closely monitoring the impact of these fees on low-income and vulnerable populations.

Cybersecurity

As the threat of ransomware attacks continues to grow, cybersecurity has become a top concern for law enforcement agencies. The Federal Trade Commission (FTC) has recently updated its guidelines on safeguarding customer information, while regulators are also expected to focus on operational risk, resilience, and incident response.

  • Cybersecurity threats are becoming increasingly sophisticated, requiring financial institutions to stay vigilant in their efforts to protect customer data.
  • Regulators will be monitoring the effectiveness of financial institutions’ cybersecurity measures to ensure compliance with industry standards.

Cryptocurrency

The rise of cryptocurrency is bringing new challenges for regulators, who are working to ensure that the industry is safe and sound. The Securities and Exchange Commission (SEC) has warned about the risks associated with cryptocurrency, while the Federal Reserve Board, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) have launched a series of “policy sprints” to provide clarity on crypto-asset-related activities.

  • Cryptocurrency’s decentralized nature poses challenges for regulators in terms of oversight and risk management.
  • Regulators will be closely monitoring the development of cryptocurrency markets and regulating activities related to crypto-assets.

Change Management

In an era of rapid technological change, law enforcement agencies must be able to adapt quickly to new developments. This requires robust regulatory change management programs and effective compliance management systems.

  • Financial institutions must have a solid understanding of changing regulations and industry standards to ensure compliance.
  • Effective change management is critical in managing the impact of regulatory changes on business operations.

Competitive Changes

The banking industry is undergoing a period of significant innovation, driven by the rise of fintechs and regtechs. Law enforcement agencies must be able to keep pace with these changes while ensuring that financial institutions remain compliant with relevant regulations.

  • The increasing competition in the banking industry requires law enforcement agencies to stay agile and adaptable.
  • Regulators will be monitoring the impact of innovation on consumer protection and fair competition.

Consolidation

As the pandemic continues to reshape the financial landscape, law enforcement agencies can expect to see an increase in bank mergers and acquisitions. Regulators will be closely scrutinizing these deals to ensure that they do not negatively impact consumers or the broader economy.

  • Consolidation can lead to increased market concentration and potential risks to competition.
  • Regulators will be monitoring the impact of consolidation on financial stability and consumer protection.

Continuing Effects of the Pandemic

The pandemic is still having a significant impact on the financial industry, with regulators continuing to monitor operational and credit risks. Law enforcement agencies must remain vigilant in managing the fallout from this global crisis.

  • The pandemic has accelerated the need for digital transformation in the financial industry.
  • Regulators will be monitoring the impact of the pandemic on financial institutions’ risk management practices.

Cannabis Banking

As the cannabis industry continues to grow, law enforcement agencies are facing new challenges related to banking and financial services. Until federal legislation is passed, the industry will rely on agency policy pronouncements and clarifications as issues arise.

  • The lack of clarity around cannabis banking poses risks for financial institutions and consumers.
  • Regulators will be closely monitoring developments in cannabis banking and providing guidance where necessary.

Conclusion

In conclusion, law enforcement agencies can expect a busy year ahead, with regulators focusing on a range of key areas including risk and compliance. To manage this significant amount of regulatory change, financial institutions must be vigilant about having robust regulatory change management programs and effective compliance management systems in place.

About the Author

Timothy R. Burniston is a senior advisor at Wolters Kluwer Governance, Risk, and Compliance, where he advises clients on emerging issues, legislative and regulatory developments, and regulatory strategy. With over 30 years of experience in the financial industry, Burniston has established himself as a leading expert in risk and compliance consulting.