Client regulatory data management challenges and opportunities

Stricter rules are being imposed on the financial sector in a variety of areas following the financial crisis. Regulators are more than ever involved in scrutinising Know Your Customer (KYC) processes and are large fines for non-compliant firms. Anti-money laundering (AML) practices have become deeper and more advanced to counter the financing of terrorism, corruption and crime. EMIR and Dodd Frank legislations were also put into place with the aim of improving transparency and reducing systemic risk in derivatives trading. To address tax avoidance, regulations such as The Foreign Account Tax Compliance Act (FATCA) have also come into play enforcing yearly reporting for US persons. All of these reforms have significantly increased the complexity of procedures financial services firms have to adhere to and the data requirements they have to fulfil.

With the increasing volume and scope of regulations firms are struggling to comply in many areas due to a variety of reasons.  The use of legacy technology and siloed working practices are often highlighted as key barriers. Organisations need to address their data management issues not only to minimise the risk of regulatory sanctions but also to improve competitiveness in an environment where margins are often tightening due to new forms of competition. The smartest firms are using this regulatory impetus to develop a new competitive edge.  Many banks for example are using KYC to understand their customers and their behaviours as intimately as retailers have known theirs for some time employing demographic profiling and other techniques.

Level of regulatory impact on firms and clients

Regulations are often amended and revisited meaning that firms need to use flexible tools and develop an adaptable architecture that can scale and meet these challenges. Historically companies adopted a siloed approach for the collection and delivery of data in client on-boarding. Different reporting and compliance teams, many touchpoints between divisions and disparate data sources and unintegrated technologies all make it harder to ensure regulatory compliance.

Fortunately a new generation of technologies and approaches designed to deal with these barriers are making compliance more achievable and demonstrable. Many have a proven track record in other industries such as online retail and social media and work well in a prototyping implementation approach.  

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Tags: AML, Banking, Compliance, Data, Data Management, Dodd Frank, FATCA, KYC, Regulation


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