DISCLAIMER: This post was last modified on 14 December 2022. Some information in this article may not be updated.

Now more than ever, compliance serves a critical part in an organisation’s growth. Non-compliance opens an avenue for financial, security and reputational risks. Therefore, legal compliance for organisations across industries should be thoroughly ensured.  

As policies and regulations are constantly being created and reformed, catching up with the fast-growing need for compliance across industries and global markets can be a challenge. This is especially the case amidst the increasing integration of digitalisation and technology in the finance market. 

Financial managers and organisations would have to create compliance systems and be aware of relevant legal compliance requirements to prepare for the ever-changing regulatory landscape, which then poses the need for professional legal compliance services. In this blog, we discuss what financial market players should expect in 2023 in terms of compliance. 

Compliance trends in the finance market 

Regulatory Technology 

Following the COVID-19 pandemic, various adjustments in compliance solutions were made. Though not a new concept, one of these is the added integration of regulatory technology, popularly known as RegTech. In a broad sense, RegTech is a branch of information technology used to manage and enhance compliance systems and processes. 

According to a study conducted by Thomson Reuters, it was found that an increase in reliance on technological solutions for compliance was seen because of the pandemic. Moreover, investment towards RegTech is valued at over 115 billion US dollars by 2023, a significant increase from 18 billion US dollars in 2018, as reported by Juniper Research. 

The increase in demand and budget allocation towards RegTech is aimed at addressing the challenges facing efficiency, sufficient governance, and integration of systems that concern compliance. Moreover, RegTech enables financial institutions to reduce friction in Know Your Customer (KYC) and Customer Due Diligence (CDD) processes, minimise human error and easily adapt to developments in compliance legislations and regulations. 

Automation in compliance checks 

Following the theme of using technology for compliance is the integration of automation in compliance processes. Automation can be applied in KYC procedures and Anti-Money Laundering (AML) tasks, which usually involve time-consuming review processes. These lengthy KYC reviews, in turn, reflect higher operating costs.  

In addition, it can also be used to onboard and maintain KYC compliance with clients. The resources needed to store and manage physical documents for KYC onboarding can also be minimised. Moreover, periodic tasks in the KYC review process can be managed with automation, which contributes to a more sustainable and standardized approach to KYC compliance. 

In a previous blog titled “KYC Mistakes That You Can Avoid,” one of the key points discussed is the use of automation, instead of manual processes, for repetitive tasks to improve data stream performance and augment efficiency. Similar to the use of RegTech, it was noted that automation can help compliance departments counteract human errors and assure compliance with updates in relevant compliance regulations.  

Perpetual KYC  

In line with sustainable approach to KYC compliance is the concept of Perpetual KYC. This approach involves the continuous process of KYC review steps, like the real-time updates of a client’s data. It means that only the complex cases and components are carried out by professionals. 

This approach to KYC compliance, however, would require top-notch technology solutions and an overhaul of the existing KYC policies of an organisation.  

To know more about AML and KYC compliance, click our list of legal compliance services here. 

Regulations to look out for 

Aside from these trends that are expected to continue for 2023, there are also regulations that will significantly affect the compliance ecosystem of certain jurisdictions in the following years.

The United States of America’s Corporate Transparency Act 

The Corporate Transparency Act (CTA) was enacted by the U.S. Congress in January 2021 and falls under the Anti-Money Laundering Act of 2020 (AMLA). Its main purpose is to strengthen the country’s efforts to protect its financial system from threats against money laundering and other illicit activities.  

In September 2022, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) bureau issued the “Final Rule” or the Beneficial Ownership Information Reporting Requirements. With this, domestic and foreign entities will be required to report their beneficial ownership information (BOI) to the bureau, providing a more stringent measure for combating illegal financial activities. 

The Final Rule will be effective on January 1, 2024. However, companies created before the effective date and subject to the rule would still be required to submit their BOI by January 1, 2025.  

Switzerland’s Anti-Money Laundering Act (AMLA) amendments 

Switzerland has a similar initiative that imposes more rigorous measures in the fight against money laundering. Stricter due diligence obligations were put in place in the revision of its existing Anti-Money Laundering Act. The Swiss parliament approved the revised amendments of the AMLA, which will be effective on 1 January 2023.  

The main amendments in the AMLA are as follows: 

1. Verification of beneficial owners. Financial intermediaries will now have to verify the information and identity of its beneficial owners prior to only establishing the information needed. 

2. Update client/business relationships data. The revised AMLA will now require financial intermediaries to periodically check and update its client data, instead of only doing so when any doubts arise.  

3. Regulatory reporting of suspicious activities. The suspicious activity report (SAR) will be filed with the Money Laundering Reporting Office (MROS) if a reasonable suspicion or concrete indications of money laundering exists. 

We have previously discussed in detail the various AML/KYC regulations in jurisdictions such as the European Union, Switzerland, Americas and Asia.  

The challenges ahead 

With these trends and regulations in mind, the challenge of remaining compliant can also be associated with other challenges, some of which are: 

1. Digital security. The digitalisation of services poses a risk to an organisation’s and its client’s digital security. Measures to ensure compliance and safekeeping of data are necessary to avoid any legal and ethical issues. 

2. Increasing costs. Though tools such as RegTech and automation can lessen the operational costs of compliance, costs are still expected to rise given the increasing number of regulations and procedures needed to abide by.  

3. Search for professional services. Ensuring compliance in an organisation across all industries requires a highly skilled compliance team equipped with the right tools. This is especially important considering that compliance covers different organisational areas, namely ESG, digital security and UBO, among others. 

Bolder Group’s legal compliance services 

In short, the compliance ecosystem in the financial technology industry is expected to be stricter and more complex. Along with this, financial market participants should anticipate and prepare for further developments in the regulatory compliance environment to counter legal risks and strengthen their security. 

As a legal compliance service provider, Bolder Group has a team of experts ready to assist you in the challenging task of staying compliant. Bolder’s compliance and regulatory services are tailor-fitted for its clients to ensure that all local and global compliance policies are securely met and surpassed.  

Contact your nearest Bolder office to know more about our legal compliance services. 

Bolder Group does not provide financial, tax or legal advice and the information contained herein is meant for general information purposes only. We strongly recommend that before acting on any of the information contained herein, readers should consult with their professional advisers. The Bolder Group accepts no liability for any errors or omissions in the information, or the consequences resulting from any action taken by a reader based on the information provided herein.

Bolder Group refers to the global network of independent subsidiaries of Bolder Group Holding BV. Bolder Group Holding BV provides no client services. Such services are provided solely by the independent companies within the Bolder Group which are each legally distinct and separate entities and have no authority (actual, apparent, implied or otherwise) to obligate or bind Bolder Group Holding BV in any manner whatsoever. The operations of the Bolder Group are conducted independently and have no affiliation with third party financial, tax or legal advisory firms or corporations.