Compliance is a non-negotiable for the regulated sectors, not only to protect themselves, but also their customers. But, with statistics revealing that 60% of business owners struggle to keep up with compliance and regulatory change, it’s clear there are still barriers holding firms back from meeting full compliance.  

And while some of these obstacles will be around for the long-haul, with the landscape becoming even more dynamic in 2024, there’s some relatively new challenges firms need to adapt to and navigate. Let’s take a closer look at the biggest compliance challenges, and how firms can gear up to tackle them this year.  

What are the biggest compliance challenges this year?

1. The evolving regulatory landscape

So much has changed over the past couple of years, with technology advancing way beyond its years and the economy taking a hit from uncertainty and change, further pushing through regulatory change. For example, as a demand for better, clearer customer service became apparent during the Covid-19 pandemic, the FCA focused on tightening regulation around accountability and responsibility for firms. From this, the new Consumer Duty was born, making it non-negotiable for firms to create and evidence good customer outcomes more consistently.  

Similarly, the regulations to beneficial ownership discrepancies and domestic PEPs have also recently changed, requiring businesses to take a more proportionate and risk-based approach when dealing with either of these.  

On top of this, GDPR measures have continued to ramp up since the regulation started back in May 2018, giving customers’ better peace of mind over their personal data and how it’s used. With new threats and risks always emerging, it can be difficult for firms to keep up with new regulations. 

2. Threat from emerging technologies

Emerging technologies, like AI, have taken businesses by storm over the past couple of years, with CompTIA’s IT Industry Outlook 2024 report revealing that 55% of global organisations having integrated the tech in some form already and a remaining 45% exploring its uses.   

While this technology is crucial for businesses to keep up with customer demands and providing firms with huge opportunities to enhance their core processes, fraudsters are using the novelty of this tech to find ways they can infiltrate businesses undetected. For example, through audio and video impersonation, money laundering and better tailored phishing approaches. 

3. Supply chain risk

When we think about the risks within a financial institution’s supply chain, we typically automatically think of the credit issues that may come from disruption to it. However, it can also present compliance risks like corruption, fraud, export controls and sanctions, ESG requirements, anti-trafficking compliance, and much more.  

Handling this is key to ensuring you’re working with the right people and meeting compliance requirements. 

4. Resource capacity and capability shortages

As regulations tighten for firms across the world, compliance training is at the top of the priority list for many managers. However, with skills and talent gaps still hitting the global workforce hard, getting your existing teams upskilled or finding the right person in a talent-scarce market, can prove to be an obstacle for your compliance processes. 

With existing teams, there may be some push-back for learning a new skill if it doesn’t match up with their career goals, or they’re not compensated for doing so. For new hires, getting them up to speed can take time, effort, and money, and take the focus off your compliance processes temporarily.

5. Conduct risk

Conduct Risk places responsibility and accountability into the hands of financial institutions and individuals in limiting the chances of negative knock-on effects to consumers, investors, or market stability.  

This can include any cybersecurity breaches, which need to be managed properly.  

How to manage these challenges 

The regulatory landscape is complex and will always be something regulated sectors are bound by. So, while firms may often run into obstacles when trying to maintain full compliance, there are solutions they can rely on to keep them on the straight and narrow. 

1. Keep up to date with regulatory changes

Legislation is created to control prominent risks, and to protect businesses and individuals from pending threats. Because of this, it’s crucial that you’re paying attention to what laws or regulations are being brought in and why—and that you’re confident that you can figure out which bits of the law are relevant to your particular business. 

2. Carry out more in-depth client risk assessments

Winning clients should never come at the cost of non-compliance. And, to ensure you’re complying with the Money Laundering Regulations (MLR), it’s high priority that you’re thoroughly assessing who you’re welcoming into your business.  

In line with the Regulations 28 (12) and 28 (13) of the MLR, firms need to identify and assess what risks each client poses them, in order to work out the level of due diligence that needs to be used when working with that client. 

According to the regulations, your client and matter risk assessments need to: 

• Determine the level and extent of client due diligence needed 
• Take account of high-risk factors e.g., a PEP or relation to one 
• Reflect the risks identified in your firm-wide assessment 

3. Invest in employee training

Compliance depends on individuals within firms doing the right thing—but how can they if you don’t tell them exactly what these right things are? Compliance training should be high up your priority list this year, particularly given the tightening of so many regulations, including the final deadline for the FCA’s Consumer Duty.  

When your teams are up to speed on what they should and shouldn’t be doing, and how to handle any problems that could jeopardise compliance, you can better control and manage compliance risks. 

4. Update your AML policies annually

We’ve already seen how quickly technology can move if pressure is applied. But this means that new threats to your business can emerge just as fast and need to be managed quickly. 

You can prevent these threats from materialising and reduce the risk of financial harm and reputational loss, by reviewing and updating your AML policies annually. These should consider whether your AML policy document assesses client and matter risk substantially and documents any new processes you’ve put into place to ensure you have a full audit trail that will meet the regulator’s requirements. Once this is done, you’ll also need to share your policy document with your colleagues, to ensure everybody is on the same page and knows what’s what when it comes to compliance matters.

5. Automate the compliance process

Advanced technologies, like AI, are revolutionising the way organisations understand and meet their compliance obligations. For example, these AI engines can scan and analyse large databases to help your business verify details about an individual or business, ensuring due diligence and speeding up the process.  

By automating the process, you can remove the chance of human error, while giving your team time back to complete high value-add tasks.  

Our compliance automation solutions can help you to navigate the complex landscape and keep you on the right side of the regulators.  

Want to find out more? Get in touch with our friendly technology experts who can introduce you to our award-winning compliance technology.