Navigating regulatory challenges with a 3 step compliance oversight strategy

Navigating regulatory challenges with a 3 step compliance oversight strategy

In the intricate world of regulatory compliance within FinTech, the three-step standard ‘Know Your Risk’ (KYR) strategy has emerged as a beacon of simplification and clarity.

This pivotal approach entwines the functionality of an ongoing monitoring strategy with the complexity of regulatory obligations, ensuring that compliance isn’t merely observed but substantiated with robust evidence. The axiom in the regulatory realm is lucid: without concrete supporting documentation to verify compliance, it’s essentially deemed nonexistent from a regulatory perspective.

RegTech company MCO (MyComplianceOffice) recently delved into the importance of having compliance evidence.

The in-depth KYR approach, as dissected in a series of discussions, commences with the construction of a unified monitoring strategy, followed by a focus on demystifying our performance against essential metrics. The critical third step in this trio strategy centres on meticulously providing the compliance documentation that is indispensable to regulators and auditors. This is not merely a bureaucratic exercise; it’s a shield against regulatory scrutiny, safeguarding firms by presenting clear, documented evidence of diligent compliance.

Compliance Chief Compliance Officers (CCOs) find themselves under the unrelenting watch of both regulators and stakeholders, both internal and external, in the prevailing regulatory landscape. The emphasis on simplicity and clarity not only alleviates some of the pressures on ensuring compliance but also deters it from morphing into a prohibitively expensive and daunting task.

The strategic approach materialises the relationship between the initial line of risk management activities and the secondary line, which is centred on oversight and monitoring of compliance, thus guaranteeing that compliance oversight is pertinent and adept at mitigating the risk of regulatory censure.

“Evidence is everything in compliance,” stands as an immutable truth in this fast-paced global environment, where regulatory expectations and organisational risks evolve swiftly and in tandem. Technology, especially in the realm of FinTech, emerges as a formidable ally, streamlining the collection and presentation of vital compliance data and consequently, enabling firms to unequivocally validate their adherence to regulatory mandates.

Navigating through the realms of risk entails being deft at both identifying and responding to it. Whether choosing to avoid, transfer, mitigate, or accept the risk, having a coherent strategy for each risk type is essential. The essence of a simplified KYR strategy also translates to having a well-defined taxonomy of data structures across assurance functions and a clear perspective on risk gradations within each domain.

Capitalising on technology to substantiate the recordkeeping aspect of the compliance function signifies that data is consistently and readily accessible. This not only ensures thorough monitoring but also that expected data points are in place, facilitating early identification of data discrepancies or gaps.

The tripartite strategy elucidated throughout this blog series promises to bequeath businesses with a potent, standardised oversight process executed by the business’s first line, confirming that the obligations are fulfilled efficiently and that senior executives can attest to that aptly.

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