Finance

What to Know About Compliance in the Finance Industry in 2023?

3 Mins read

Over the last few years, the finance industry has successfully navigated exceptional levels of uncertainty. From insurance and real estate to investment management in capital markets and banking, the global finance industry has faced the pandemic with extraordinary adaptation and resilience. However, the upward climb continues. Facing multiple economic and geopolitical challenges, including inflation, global or regional recession, disrupted supply chain, and the war in Ukraine, 2023 promises to be a year with more compliance regulations.

While the financial service leaders get ready to move the finance industry forward, here is something everyone must know about compliance support in the finance industry. 2023 might be the year of ‘new normals’. Several opportunities will help define the future, inextricably linking the purpose and profits.

Fintech Partnerships are Here to Stay

Many companies found fintech partnerships as the most significant part of their growth and development strategies. While they benefit from these relationships in many ways, the introduction of unregulated third parties might result in more or new risks. As a reaction, regulatory agencies introduce enhanced expectations for risk management, particularly from financial institutions. They are expanding their regulatory parameters to demand regular updates for risk assessment and ongoing change management.

Focus on Overdrafts

In 2023, regulators will keep their key focus on overdrafts related to financial institution practices. While some bigger institutions might limit or eliminate overdraft fees, regulatory authorities demand customer protection from avoidable overdraft charges. Regulatory bodies might expect financial institutions to take corrective measures for representments of overdrafts before scheduling any compliance support exam. They might also charge fees for items that return unpaid. Besides regulatory risks, attorneys keep looking for opportunities to legally challenge overdraft fees related to re-presented items.

Transaction Monitoring for Cryptocurrency

As more investors invest money in cryptocurrency, the potential for suspicious activities and unknown transaction behaviors increases significantly. That is why an institution must prevent and detect money laundering activities. With improved due diligence regulations, finance bodies must identify their customers and take appropriate steps to avoid suspicious behavior during transactions. Transactional data that financial institutions gather will serve as a valuable resource to identify and address those risks in time.

The Incidence of Appraisal Bias

While most financial institutions have prioritized fair lending in the last few years, the incidence of appraisal bias has become more common in the financial marketplace. It often happens when an appraiser evaluates a property and assigns a smaller value based on its location or the homeowner’s race. Appraisal bias not only impacts lending transactions but also affects generational wealth, considering the significance of real estate assets for anyone. Financial institutions must begin grappling with how appraisers address this issue in 2023.

Compliance with Environmental, Social, and Governance Regulations

While their primary focus is climate change, Environmental, Social, and Governance (ESG) aspects are also gaining momentum. Specific ESG regulatory guidelines are not yet set for financial institutions. However, regulatory authorities have acknowledged the climate change-induced financial risk and have drafted principles to provide insight into upcoming expectations. Increased cooperation among global regulatory authorities is expected to create detailed guidance in 2023.

Updating Cash Management Solutions for Cryptocurrency

Digital assets are no longer a novelty. More financial institutions have accepted them as normal mediums of transactions. So, they need to ensure sufficient compliance support and coverage for digital economic activities, address the regulatory requirements, and mitigate the risks involved. Regulatory authorities require financial institutions to manage compliance risks, especially cryptocurrency-related ones. The current regulatory bodies and administrative leaders must increase their evaluation of cryptocurrency and introduce new regulations for digital assets.

In 2023, the finance industry should see compliance support not as a costly obligation but as a crucial business driver. Over the last few years, most fines and penalties levied on the finance industry aim to free up costs through significant operational and market stress. Financial institutions can ensure smooth operations and derive value for shareholders only if they run efficiently without sacrificing quality and staying compliant with high standards.

Reputable financial support services provide insight to decision-makers within investment managers, real estate organizations, insurance companies, capital market firms, and banks. With industrial experiences, analytical skills, and cutting-edge research technologies, they become trusted sources for timely, reliable, and relevant insights.

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