Lewis & Ellis, LLC

Financial Services Regulatory Compliance: Top Challenges and Solutions

Regulatory Agencies
by Allison Young
Financial service organizations are upheld to many standards. Learn strategies for enhancing compliance.
Financial service organizations are upheld to many standards. Learn strategies for enhancing compliance.

In financial services there are laws, regulations and guidelines set by a regulatory body, such as the government of a state. They're designed to ensure the integrity, transparency and stability of the financial system while protecting the interests of both consumers and investors.

Financial institutions must comply with the various regulations set forth, covering areas like anti-money laundering (AML), know your customer (KYC), data protection, risk management and more.

Failure to comply may result in penalization. Financial institutions could suffer serious legal consequences, hefty financial penalties and fines, and even a damaged reputation.

Here, we'll help investors and institutions understand the challenges of regulatory compliance as well as strategies to help overcome them.

The Role of Regulatory Compliance in Finance

The role of compliance in financial services is multifaceted but crucial for the integrity of the industry as a whole.

Regulation adherence and consumer protection are just the tip of the iceberg when it comes to challenges facing the industry, and institutions must overcome them to remain compliant.

These three common yet critical challenges are a few of the most pressing that can put a strain on financial institutions' resources:

Adherence to Regulations

The primary purpose of compliance standards is to ensure that financial institutions operate within the legal and regulatory frameworks set by government authorities. This includes local and international regulations that govern various aspects of financial services, such as banking, foreign exchange and securities.

Consumer Protection

Regulatory compliance measures are often designed to protect the interests of both consumers and investors. This involves ensuring fair and transparent practices, preventing fraud and maintaining the confidentiality of customer information.

Research shows that consumers consider the trustworthiness and data protection policies of organizations just as important as the cost of the service. In fact, 87% of respondents to a McKinsey survey say that an ethical company with a trusted reputation is a major buying decision.

Data Security and Privacy

Safeguarding customer data and ensuring privacy is another important aspect of regulatory compliance, and is particularly important in an era of increasing cyber threats, such as data breaches.

In the same McKinsey survey, about 40% of consumers say they've stopped doing business with an organization that was not protective of customer data.

Top Regulatory Compliance Challenges for Financial Institutions

Navigating regulatory compliance can be a complex challenge for financial institutions. Not only are there a considerable number of regulations to adhere to, but they're always changing, too. As technology gets more proficient at certain financial tasks and institutions increase how they're using it, regulations must keep up.

Common regulatory compliance challenges include:

Changing Regulations

Regulations are dynamic and subject to frequent updates. Keeping up with these changes — especially extensive ones — requires financial institutions to adapt internal processes, which can be a significant and time-consuming commitment.

Data Management and Privacy

Financial institutions are responsible for an abundance of sensitive customer information. It's imperative that data security and privacy are top of mind for institutions, and that they meet compliance requirements such as the General Data Protection Regulation (GDPR).

Anti-Money Laundering (AML) and Know Your Customer (KYC)

AML and KYC processes are critical safeguards in mitigating and preventing money laundering, fraud, terrorism financing and other forms of financial crime.

Various software tools are designed to facilitate hearty AML and KYC processes, which should accompany the development and implementation of steadfast security policies across your organization; however, this can be a resource-intensive process and an uphill battle for financial institutions.


In a recent report, the World Economic Forum ranked cybercrime and cyber insecurity 8th on a list highlighting risks that produce the largest and most devastating business impacts.

The increasing frequency and sophistication of cyber threats pose a significant risk to financial institutions. Compliance requires the implementation of strong cybersecurity measures to protect customer data and maintain the integrity of financial systems.

Vendor Management

Many financial institutions rely on third-party vendors for various services, such as banking software. As an extension of your organization's service, it is paramount to ensure that all vendors comply with relevant regulations and have a strong risk management strategy in place. Without one, the consequences of a vendor's actions or negligence can trickle down and have a large, negative impact on your organization.

Global Compliance

Multinational financial institutions must navigate a complex landscape of different regulatory frameworks across various countries and jurisdictions. Ensuring compliance on a global scale requires a deep understanding of diverse regulations.

Documentation and Reporting

Maintaining accurate records and producing comprehensive reports is necessary to demonstrate compliance. Institutions need efficient systems to handle documentation and reporting requirements.

How To Maintain Compliance Regulations

Strategies and services that are tailored to the unique needs of your business are the most practical and effective way to assess and maintain regulatory compliance within your organization.

From auditing to compliance strategy planning, Lewis & Ellis can help your organization with:

  • Monitoring and auditing: Establishing mechanisms for continuous monitoring of activities within your institution is a large piece of the compliance puzzle. To do this, you must conduct regular internal audits to identify and rectify any compliance issues. External audits completed by trained actuaries may also be necessary for an independent evaluation.
  • Risk assessment and compliance risk management: Conducting regular risk assessments to identify potential compliance issues can help when developing proactive strategies to mitigate the impact of said risks.
  • Compliance strategy framework and planning: Actuaries can assist in developing strategies that align with your business goals and objectives while adhering to compliance requirements, so you can navigate the regulatory landscape with more confidence.

Tailored Regulatory Compliance Solutions

Lewis & Ellis offers compliance support services across life and annuity, health insurance, group accident, P&C and more.

The world of insurance and benefits regulations is complex. Lewis & Ellis enables you to face financial industry regulation challenges head-on and with greater confidence to mitigate financial risk and uphold compliance standards.

Ready to learn more? Contact Lewis & Ellis today.



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