What Is Financial Regulatory Compliance?

Financial regulatory compliance refers to financial services and banks following laws and regulations. It can relate to insurance banks, investment banks, lenders, and other financial institutions. 

Financial regulatory compliance is different and stricter than regulatory obligations for other industries. Regulations give more transparency and support to the US financial system.

Learn more about financial compliance and how to improve it in your organization.

Why Is Financial Compliance Important?

The economy’s current state and past financial disasters are not great press. The financial regulatory environment is the strictest of all industries. Financial compliance is now more critical than ever. 

You must know the rules related to compliance. It can help prevent a fine or penalty from the regulators or, in extreme cases, imprisonment. In some cases, it can destroy a company’s reputation forever.

Financial Data Protection Regulations

Here are some of the financial data protection regulations:

General Data Protection Regulation (GDPR)

The GDPR is a strict data protection law in the European Union (EU). It governs how to manage data in the EU and online privacy.

Payment Card Industry Data Security Standard (PCI DSS)

It is a series of financial data security guidelines to safeguard consumer data. It standardizes how you process, store and send cardholder data.

Gramm-Leach-Bliley Act (GLBA)

This act requires financial institutions to detail their information-sharing practices to customers. Also, to safeguard sensitive data.

Laws That Regulate Financial Compliance

Several laws regulate financial compliance. Here are a few of the most common ones:

The Sarbannes Oxley Act (SOX)

The Sarbannes Oxley Act came into law in the US after Enron, Tyco, and WorldCom scandals. It intends to crack down on corporate fraud and corruption. 

The Act focuses on how organizations disclose and record their financial information. Financial service compliance also needs companies to install cybersecurity to protect financial data.

Anti-Money Laundering (AML) Directives

The AML directives aim to prevent money laundering and financial support for terrorists. It also helps to create a consistent regulatory environment across the EU.


MiFID II is a legislative framework from the EU to regulate the financial markets. It aims to protect investors further. It works to standardize practices across the financial services industry.

Regulatory Checklist for Financial Institutions

As a financial institution, you must follow compliance at every business level. You must ensure you follow the above laws and regulations. Also, try and install some security and preventative measures.

  • Use encryption as an extra security layer to stop cyber criminals from stealing data.
  • Track your third-party vendors to ensure they follow the rules and regulations.
  • Create comprehensive security policies to respond to incidents and report them.
  • You must log all security event information and review it. This logging and data collection includes firewalls and anti-spam.
  • Any company that processes cardholder information needs to install and maintain a firewall.
  • Use intrusion detection to help stop attempts to get information through the network.

How Has Regulatory Compliance Changed Over Time?

Regulatory compliance is not the same today as it was 20 years ago. Technology advanced at a breathtaking speed through the pandemic, pushing more companies online. As a result, more financial processes are now happening online.

While this has helped improve efficiencies for both customers and businesses. There is also a higher possibility of fraudulent activities. These could be things like cyber-attacks, data breaches, and money laundering.

Regulators are moving with the times to combat these dangerous activities. There are more financial regulations every year to counter the evolving environment.

Top Issues Facing Financial Compliance

There are many issues involved in financial compliance. Here are some primary areas where regulators update their compliance requirements. 

Data Privacy

There have many incidents of data breaches in the financial sector. Any sensitive information, for example, cardholder data, must be 100% secure. Laws, such as PCI DSS (see above), help with consumer protection.


What systems do you have in place to handle a cyber attack? If you can’t answer that question immediately, it is time to look into this. You might need to build a cybersecurity compliance plan.

You can manage this by performing regular security updates. Also, ensuring there are no insecure connections. Routine backups should be part of a security routine. Intrusion detection software is also a proactive approach.

Consumer Laws and Regulations

You have to build consumer trust, maintain it, and track it. If you break this trust, it could damage your financial organization forever. Following consumer laws and regulations is an absolute must in the financial industry.

Employee Misconduct

The compliance team must update employees on changes to compliance requirements. Ensuring compliance might mean new employee training when company policies and procedures change.

It is your responsibility to update employees on any changes to compliance requirements. For example, employees might need extra training when policies and procedures change.

Financial Crimes

As mentioned earlier, financial crimes in 2022 are rising. Regulators expect organizations to put steps in place to combat this. It would help if you showed that your organization wants to prevent crime.   

Corporate Governance

An organization can use a defined set of guidelines, practices, and rules. It helps it to control, manage, and operate the business. This regulatory framework helps companies cater to all major stakeholders.

How to Improve Financial Compliance

Your organization wants to stay compliant and avoid a potential fine or penalty. The best way to manage this is to improve your current compliance setup. You can do this by paying attention to the following areas.

Prevention First

One of the best ways to improve compliance is to prevent potential problems. It’s far easier to pick up the pieces when something goes wrong. Put policies and procedures in place and create a culture of compliance.

Monitoring Compliance

You can do this by staying on top of important regulatory issues. You can also check compliance in your organization and understand how well you are doing. It will help you to make any necessary changes.

Compliance Oversight

If you have compliance oversight, you can react to any risks. Placing a designated compliance officer in charge is an absolute must. When you have a set person responsible, you can manage financial regulatory compliance in a better way.

Integrated Risk & Compliance Solutions

It can be challenging to manage it all yourself, even more so if you use manual processes. Fintech firms can offer risk and compliance solutions to match your needs. 

The Final Thought

Financial regulatory compliance is not a separate function of an organization. It is an integral part of the business that affects the entire organization. This article can help you manage your financial compliance efforts.

Take your efforts further and consider working with a specialized fintech business. These companies use state-of-the-art technology to improve compliance. Also, integrating tech solutions can help reduce your manual processes.

Sally Leslie

Sally Leslie is the content editor for Planet Compliance. She also writes B2B content and case studies for entrepreneurs, SMEs, and startups worldwide. She is a lover of plants, freedom, and football. https://www.contentcatcreations.com/

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