Is your financial institution overlooking its greatest asset? In today’s competitive market, many companies undervalue the role of compliance.
According to Arctic Intelligence, financial services companies – whether banks, traditional money service businesses (MSBs), or innovative FinTechs – often become blinded by competition, enamoured with rapid growth, market size, and the allure of capturing market share and growing revenue. The FinTech sector is celebrated for its ability to innovate swiftly, disrupt markets, and adapt to consumer demands.
However, this excitement and investor validation can overshadow a critical truth: market size and growth speed mean little if a financial institution fails to operate compliantly and manage its risks effectively.
Compliance is not just a regulatory box to check; it’s a vital component of a robust financial operation. Without adherence to regulations that ensure safe and sound operations, prevent abuse by criminals for money laundering and terrorist financing, and protect consumers, even the most innovative businesses can fail.
The ability to pivot quickly or build a large customer base is of little value if a company fails to meet regulatory standards, resulting in fines, reputational damage, or even loss of license or banking partners. Both large and small MSBs can miss the mark and fall from grace.
Governance is the cornerstone and risk assessment is the foundation upon which the pillars are placed as part of building an effective risk-based compliance programme that is reasonably designed. Independent reviews, a “pillar” requirement under the Bank Secrecy Act, play a crucial role in ensuring that financial institutions understand and effectively mitigate their unique risks while maintaining effective risk-based BSA/AML and OFAC compliance programmes. These reviews help identify potential weaknesses, correct course, and reinforce the institution’s commitment to lawful and ethical operations.
Viewing compliance, risk assessments, and independent reviews as mere cost centres or obstacles to business growth is a misconception. In reality, they are critical to a company’s success, sustainability, and positive reputation. If board members and executives fail to recognise the importance of compliance efforts responsive to its risk assessments and independent reviews, they may underfund compliance efforts, leading to unaddressed gaps and unmitigated risks.
Board members and executives who see compliance efforts only as an expense and necessary evil may also ignore the advice of compliance teams, internal audits, independent reviewers, and regulators about significant risks and necessary work.
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