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We are all riding a new wave of global regulation. In a recent webcast titled Navigating the Regulatory Shifts in 2023, I was astounded to hear how many current and proposed regulatory changes are on the horizon this year. The increased demand for greater regulatory oversight – by the SEC, CFTC, or perhaps a new government body that specializes in crypto infrastructure – places tremendous pressure on compliance teams around the globe to provide an agile compliance infrastructure that is more automated and transparent.
As compliance (and the cost of non-compliance) moves to the top of agendas industry-wide, compliance executives can play a key role in strengthening business competitiveness and creating new growth opportunities this year. Here are four emerging trends that are quickly coming into focus:
1. FOLLOW THE LEAD OF FINANCIAL SERVICES
The financial industry has raised the bar and has become a poster child for how and why compliance works. A culture of compliance has become so ingrained in this industry that the processes, rules, and regulations over time have become second nature. Compliance teams in other industries would do well to learn best practices from their counterparts in finance and save themselves a lot of trouble by getting ahead of compliance problems before they arise.
2. SHINE A LIGHT ON SHADOW TRADING
The SEC has taken a strict approach to shadow trading and while it can be hard to spot, it’s important that it’s identified before it becomes costly. Compliance teams must have a wide range of data from various sources to be able to link the activity together. This is where it becomes increasingly important that a firm has compliance software that can analyze activity in a quick and efficient manner. Taking steps to verify if you can identify industries, securities linked to business entities, and economic activity will be helpful in securing the data you need to identify shadow trading.
3. BUILD ON EMERGING CRYPTO REGULATIONS
With the difficulties and scrutiny that the crypto ecosystem has faced over the last year, there is a growing demand for more oversight. Following the lead of traditional financial institutions by implementing compliance software could prove to be an advantage for crypto-related firms, improving both their competitiveness and overall health.
Compliance software for these firms can reduce employee compliance risks by identifying and preventing conflicts of interest, and providing a frictionless trading experience, but more importantly, there needs to be a shift in culture. When the need for compliance is recognized, it must be embraced from the top down and permeate through the organization. The infrastructure that accompanies this culture must provide individual accountability, oversight, and possess a straightforward reporting platform.
4. INVEST IN A CHALLENGING ENVIRONMENT
When the economic environment becomes challenging, this is a great time to reassess and prioritize opportunities and investments. Working in the present conditions while looking towards the future will help to catapult a firm when economic conditions begin their upswing and one way to do this is to invest strategically in compliance. A low-growth environment can be an ideal time to explore investment options in software – either internally or externally. There are pros and cons to both, but whether you’re looking to build solutions in-house, outsource technology or take a hybrid approach with a trusted partner, using this time to evaluate your needs and build a plan today can provide you with a whole new level of competitiveness tomorrow.
Being aware of the emerging trends in compliance can help to identify where firms can gain a competitive edge. Leveraging technological advances as compliance moves into a more intense spotlight is important as we see a new wave of global regulations begin to make their impact.
Find out more about these four key compliance trends in StarCompliance CEO Jennifer Sun’s Q1 2023 Executive Brief, The Compliance Sprint: Leveraging Technology for Competitive Advantage.
