As part of our ‘State of Compliance’ research project, we collected data from interviews with almost 50 compliance professionals across more than a dozen industries to find out the compliance challenges that teams are bracing for in 2023.
The challenges facing compliance professionals and those in the businesses of financial crime prevention evolve on a near-daily basis. Whether it’s new regulations to contend with, mastering new technologies, attracting talent or staying on top of the latest trends in financial crime and money laundering techniques; compliance professionals must be nimble enough to think on their feet and pivot at a moment’s notice.
While one of the biggest lures for those entering the field of compliance is the ever-changing nature of the sector and the notion that ‘no two days are the same’, there is mounting pressure on professionals to pay attention to, and revise, compliance processes as these changes come about. Failing to do so could result in non-compliance and hefty fines from the regulators.
Staying on top of regulatory change biggest compliance challenge
Reflecting our findings into the priorities of compliance professionals, keeping abreast of regulatory and political change tops the list of challenges that leaders are bracing for in 2023.
Cited by nearly half of our respondents (42%), the task of managing regulatory requirements evolves as the nature of technology, money and society evolves. Regulation is often issued in response to societal changes (such as the surge in interest in cryptocurrencies and NFTs, or the recent Russian invasion of Ukraine) or to keep up with changes in technology (challenger banks and Buy Now Pay Later solutions for example).
Regulators are relentlessly pursuing what they perceive to be “weak links” within risk programs and coverage. Expect increases across supervision, enforcement, and investigations under both old and new regulations — even with a heightened discord in public policy and increasing judicial challenges to regulatory authority.KPMG
The challenge of staying on top of regulatory change is only magnified in cases where firms operate globally. Complying with cross-border and multi-jurisdictional AML rules can be a difficult task for compliance teams. There may be different AML regulations in place in different jurisdictions for regulated institutions, making compliance at all levels a demanding task.
Comprehensive data coverage is troublesome
Reflecting this, the challenge of sufficient data coverage and accuracy for AML compliance poses a further challenge for one-third (33%) of our respondents.
Accurate data is the cornerstone of a robust KYC/B process. Whether gathering information on private individuals and corporate structures, or screening for sanctions and other adverse data, compliance teams need to be able to review potential matches, explore additional information and exclude false positives quickly as part of the onboarding process.
Manual KYB checks alone can involve compliance teams searching company records for days on end, thumbing through case files, chasing down documents from Ultimate Beneficial Owner (UBOs) registers, and verifying endless pages of company accounts and financial statements. This, which can ultimately stretch an already lean department’s resources, can also have a detrimental effect on time-to-revenue and cash flow.