Ensuring Regulatory Compliance for BFSI Firms in a Digital World

Sameer Kulkarni

Ensuring regulatory compliance for Banking, Financial Services, and Insurance (BFSI) firms has to be as per the guidelines of the Reserve Bank of India (RBI), the Schedule Banks, Small Finance Banks, Non-Banking Financial Companies (NBFCs), and other financial institutions to set a process for streamlining and monitoring internal compliance. The RBI clarified monitoring compliance with the use of technology and recommends initiating a review and improvements to the use of technology. Navigating legal rules is tricky for Indian banks, finance, and insurance firms in the digital age. Laws and tech create a complex maze. Here’s how they can ensure compliance:

In the modern era, the development of regulatory compliance is linked with technology for its simplification, monitoring, and transparency. The role of Governance Risk and Compliance (GRC) tools is essential to helping banks and NBFCs track and trace the status of compliances and identify the level of risk involved in regulatory compliances.

Grasp the Regulatory Landscape: Keep track of the latest regulations from authorities like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), and others. This includes rules on data protection, cybersecurity, anti-money laundering (AML), know your customer (KYC), etc.

Also Read | Regulatory Compliance and Risk Management: Insights from Elets 8th BFSI CXO Masterclass

Robust frameworks to meet rules are vital: Design and put in place full compliance systems that cover all laws. Include policies, methods, checks, and ways to watch to maintain guideline following.

  1. Use tech for compliance: Employ solutions like software to handle compliance, regtech, and advanced analytics to smooth compliance processes, report regulations automatically, and watch compliance live. Dashboards and the status of compliance with risk help the Banks and NBFCs move forward with a plan of mitigation and compliance.
  2. Secure data and privacy: Enable strong data security measures to safeguard sensitive customer info and adhere to data protection laws like the coming Personal Data Protection Bill. Encrypt data, control access, audit security often, and train staff on best data safety methods. Shield client details through robust security practices like encryption and access controls. Conduct audits. Train staff on data protection policies. Comply with Personal Data Protection Bill guidelines. Stop illicit money flow by enforcing strict anti-money laundering (AML) checks. Employ know-your-customer (KYC) procedures. Use AI analytics to monitor dubious transactions and background checks. Bolster defends against cyber-attacks and data breaches through firewalls, intrusion detection systems, and endpoint security solutions. Perform regular cybersecurity audits. Test system vulnerabilities through penetration testing.
  3. Compliance Training and Awareness: Set up frequent training sessions and educational programs for employees. These will help them clearly understand their duties related to following rules and regulations. The goal is to make sure everyone can easily identify and reduce the risks of not complying. Games, role-playing, and interactive sessions can make learning engaging and memorable.
  4. Engage with Regulators: Keep an open line of communication with the authorities that make and enforce the rules. Have regular conversations with them. This way, you can ask questions to clarify anything confusing. You’ll also stay updated on any changes to your business’s requirements. Being proactive shows you take compliance seriously.
  5. Regular Compliance Audits and Reviews: Schedule routine check-ups to carefully examine how well your compliance controls are working. These internal audits will reveal any weak areas that need improvement. Self-evaluations by your team are important, but bringing in an outside expert for an independent review is also wise. Fresh eyes may catch issues you’ve missed.

Also Read | Regulatory and Compliance Landscape: Navigating the way

Being flexible and able to change quickly is very important for banking, financial services, and insurance (BFSI) companies. The rules and laws these companies must follow are always changing, especially with new technologies and digital services. So, BFSI firms need to be ready to adjust and adapt to any new rules or best practices that come up in their industry. They can’t stay stuck in their old ways or ignore the changes happening around them. By being A minor non-compliance by a Bank or NBFC will impact the business, investment, penal consequences, payment of a fine, and more. It’s essential to use the digital environment, AI, machine learning, GRC tools, and compliance tools to track each and every compliance and its risk levels. Transparency in the regulatory environment with the use of technology is a global standard, and India is in the process of achieving it.

Views expressed by Sameer Kulkarni, CIO, Core Integra

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