By Craig Focadi
At our Compliance Week webinar “When You Have to be Right: The Top 10 Compliance Management Considerations for 2023 “ on September 29th Elaine Duffus, (esq.) Senior Specialized Consultant, Wolters Kluwer Compliance Solutions and I presented on how financial institutions can combat current market volatility, lagging budgets, and weak regtech technology to automate compliance management. To help you and your organization prepare for 2023 and shore up your ethics and compliance programs, we presented the Top 10 Compliance Management Considerations for 2023 and the Seven Pillars of an Effective Compliance Management Program that should all be on your radar.
As I shared before our webinar in “Preparing for the onslaught: managing compliance when markets change”, banking and financial markets are beginning to feel the effects of inflation and rising interest rates in 2022. The key question as we approach 2023 is what compliance gaps will the current inflation crisis reveal, and what should financial institutions do today to better manage through what an uncertain future brings? Our webinar gave us an excellent opportunity to drill-down into these critical issues and make tangible compliance management recommendations.
Our webinar began by briefly sharing some of the key findings from Wolters Kluwer’s 2021 Regulatory and Risk Indicator Survey from the fourth quarter of 2021. These findings helped frame the Top 10 Compliance Considerations for 2023. The survey asked about the most pressing regulatory compliance challenge over the next 12 months. The top concern from respondents was keeping up with regulatory changes.
For the survey respondents, there was less about specific issues and more about how to deal with change and compliance program management, how new or changed regulations are impacting them, and how regulatory changes and risks are being managed.
Wolters Kluwer’s Top Ten Compliance Considerations for 2023
We’ve all been reading about the regulatory enforcement actions of the last several years. In our view, there is a common theme that runs through them all. Financial institution compliance and ethics programs were complete on paper but not in practice. For this reason, we chose a fundamental “gut check” exercise on ten critical elements, of financial institution compliance and ethics programs, based on a proven framework, as the Top 10 Considerations for 2023 shown below.
Your compliance program must, of course, include applicable elements of the frameworks and guidelines put forth by specific statutes and regulatory agencies that apply to your business model. However, your program should also consider Chapter 8 of the Federal Sentencing Guidelines for Organizations, specifically §8B2.1 which tells us exactly what the Department of Justice (DOJ) considers an Effective Compliance and Ethics Program.
The top-level consideration, “Hardening your defenses and preparing for the onslaught” seemed a little dramatic of a phrase until we considered what’s been coming at the financial services industry over the last few years – and it doesn’t look to be letting up anytime soon. An organization’s primary defense to a law, rule or regulatory violation is their compliance and ethics program.
It’s a new world out there for the compliance function and you need to ensure that your organization is ready. What onslaught are we referring to? Well, there are still lingering issues related to the pandemic like remote or hybrid work environments, there’s the digitization of everything, cryptocurrency, Environmental Social and Governance (ESG) tracking and reporting, domestic extremism, the politicization of everything, the proactiveness of state legislators and regulators in consumer protections with the vocal support of the CFPB, and data protection and privacy rights of all kinds remain front and center at both the federal and state levels.
To help your organization’s compliance function deal with these challenges and more without breaking down, we concluded that we need to go back to the basics – the strength of your compliance program, automated using technology, will determine how, and indeed if, your organization can withstand today’s onslaught of change and scrutiny.
Enabling Effective Compliance Management with Technology
We believe that compliance management is optimized by technology-driven automation. The exhibit below has three sections and three messages:
- Achieving compliance effectiveness requires coordination of people, processes, and technology to implement policies within a compliance risk framework.
- Identifying compliance processes embedded with account origination and account management is essential so that automation can keep compliance from slowing down front-office customer engagement and back-office processing.
- Compliance automation requires multiple technology components working together to automate compliance management and optimize compliance effectiveness.
Underlying process management, and process automation, are the following technology components:
- Data management: the accurate definition, collection, storage, and use of customer, transaction, and other types of data
- Platform: the software system or systems that comprise a compliance management system using the other technology components
- Analytics: calculations to test and report on compliance requirements on a real-time basis for account origination and for account management
- Integration: connecting data, systems, analytics, and reports
- Reporting and presentment: the complete, accurate, and flexible distribution of compliance information required for management to optimize compliance management and comply with regulations.
Source: Wolters Kluwer
