90% of financial services see rising compliance costs – SteelEye survey finds

Nine in ten financial services firms have reported an increased compliance cost over the past five years, with 10% saying costs have doubled, according to research from RegTech firm SteelEye.

The survey also found that 44% of firms are planning to invest more in RegTech solutions in the next 12 months. This comes as a response to growing pressure on compliance functions in the current landscape. A further 41% expect to invest the same amount as the previous 12 months.

These findings come from SteelEye’s first ‘Annual Compliance Health Check Report’, which surveyed 170 senior financial services compliance and risk professionals in the UK and US. It explored the challenges they face, investment priorities and technology adoption.

Compliance challenges

The survey found that 44% of compliance professionals struggle with challenges related to data management. This includes overlaying communications and trades to manage market abuse risk, using management information efficiently to demonstrate risk and consolidating and normalising structured and unstructured data.

A fifth of respondents said keeping up with regulatory change is their biggest challenge in meeting regulatory obligations.

However, there were divided opinions on whether things have got harder with regulators, with 42% saying it is now more challenging and 48% stating they find it easier to deal with regulators.

When quizzed on if firms are equipped to handle more stringent regulatory rules over the next five years, 75% said financial services firms are in a good position.

Manual processes

Despite the advent of RegTech solutions, 50% of respondents said at least half of their compliance staff are doing administrative or repetitive tasks.

The survey did highlight a shift towards centralised compliance management, with 56% of respondents working with one team that oversees compliance for all branches and regions. Just 12% said they have a decentralised model where compliance is managed directly within individual jurisdictions.

Small firms are more likely to have a centralised approach, with 88% of them having this type of system. SteelEye claims a centralised approach can allow businesses to be more strategic and have richer learning across multiple jurisdictions. However, it needs strong data foundations to work.

The power of machine learning

A growing number of companies have fully implemented AI or machine learning, with 31% saying this technology is fully deployed into their compliance processes. An additional 25% said they are investing in the technology but are still implementing it.

Of those to have implemented the technology, 100% of them claim to have seen a marked improvement in the quality of their management information.

However, some are still hesitant of that technology. Of those yet to take advantage of AI, 44% said they have not even looked into the possibilities of the technology in compliance.

Speaking on the research, SteelEye CEO Matt Smith said, “Technology and data are key to establishing future-proofed compliance processes and procedures. It is great to see that a large proportion of firms view the enhancement of data quality as a top priority and that most firms are actively investing in technology. By prioritising how to bring together disparate datasets and make better use of data firms can more easily address regulatory change and other compliance challenges that will emerge down the line.

“We are hopeful that these investments will enable compliance teams to improve the efficiency of their compliance programs – thereby reducing their reliance on administrative and repetitive tasks. Doing so can enable the compliance function to pivot from reactive investigations and firefighting to a more proactive model for compliance management and risk detection.”

Another recent study from SteelEye found that voice transcription services have become a major priority for firms. It analysed all requests for information for communication surveillance received over a 12-month period and found that 100% of cases had voice transcription as a key requirement.

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