Banks’ rapid digitalisation leaving compliance teams in “no man’s land”

Regulators need to understand the challenges facing compliance teams in large banks “left in no man’s land” during a period of rapid digitalisation.

Compliance teams are at the mercy of banks’ digitalisation

That’s according to Riten Gohil, partner and co-founder at Sphonic. Gohil, who spent time as an investigator at the Serious Fraud Office, says banks have been confronted with “massive transformation projects”.

He tells FinTech Futures while these projects have high priority in some cases they aren’t moving fast enough. This leads to IT resources useful to the compliance function being tied down elsewhere.

“There is a need for regulators to be cognisant that some of the larger banks face [challenges] in embracing innovation,” says Gohil.

“It is worth regulators considering what they can do from their side to make life easier for compliance teams and provide better advocacy for smarter technology to help solve their growing challenges.”

High-growth fintechs and challengers are coming into the sector and innovating around compliance.

“They are in many ways shaping some of the thinking for the larger banks as the digital market share battleground continues to evolve,” he adds.

“A road to disaster”

High-growth firms can run into issues of their own when it comes to compliance.

“For years your traditional compliance officer has been a larger than life ex-FCA [Financial Conduct Authority], fraud squad detective, or banker,” says Gohil.

“They were the torchbearers within compliance teams across the big banks keeping the industry and the country safe.”

Start-ups either haven’t had the time, the money, or the inclination to get an old school compliance specialist on board.

“Some newer fintechs are bringing people into compliance roles who aren’t compliance people at all,” says Gohil.

“I’ve come across this on a few occasions, where we might be speaking to a fintech about the technology we provide and find we’re not talking to someone who has an any real knowledge of the compliance environment.”

Gohil says that this is an issue “no matter how small you think you are”. If firms don’t get their compliance processes and teams right from the outset, they’re on “a road to disaster”.

“Irrespective of what it costs, the cost for non-compliance hugely outweighs those for being and staying compliant in the first place.”

Yet Gohil says a new breed of compliance specialist is entering the scene. Those who have got to grips with the needs of the sector and combined it with newer digital trends.

“These folks have had time to grow into it the space. They’re a bit more hungry, inquisitive and naturally a bit more tech savvy. They’re geared up to embrace innovation and respond to changing times.”

Related: FinCEN Files: Legacy technology “not up to the challenge” to tackle AML

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