Financial compliance is not just about following the rules, it’s about building confidence among your people, investors, and customers that you’re doing more than checking the box. As the scope and complexity of regulation in the financial services industry continues to expand, are you prepared for the challenges that could affect your ability to comply?

Failure to comply can result in financial penalties, litigation costs, and reputational damage that can be hard to recover from. You need a structured approach to stay on top of evolving conditions and an always-expanding list of regulations.

What to Watch Out For

Here are the top financial compliance challenges you’re likely to encounter. How you handle them could make a big difference to your bottom line:

Digital Transformation

Once considered traditional and dated, the financial services sector has fast-tracked digital transformation in response to remote working, an increase in cyberattacks, and an urgency for contingency planning. And the transformation continues. Three-quarters of banks and credit unions recently surveyed say they have embarked on a digital transformation initiative and another 15% plan to implement a digital transformation strategy by year end.

Experience says that the rise of digitalization will bring increased regulation. Regulators, however, are struggling to keep up with the current pace of digitization – especially around artificial intelligence and machine learning. But more regulation is inevitable. Make sure your digitalization plan is well-planned and executed to withstand future scrutiny.

A successful data transformation program requires sound data governance and risk management. Aligning people, processes, and technology with operational strategy is fundamental to success. And compliance teams need to be involved every step of the way in organization-wide efforts.

Compliance Cost

The complexity and volume of regulations makes financial compliance a big expense. And costs are increasing. Indeed, compliance costs are up 60% for retail and corporate banks over prefinancial crisis spending levels.

Reducing costs is achievable. One of the biggest timewasters in financial compliance is determining the ins and outs of what needs to be reported, where the data resides, and how to get it into a timely report. By streamlining and automating regulatory reporting using AI-powered technology, you will save time and reduce fines for noncompliance.

While financial services organizations are under intense pressure from regulators to improve their corporate compliance practices, simply adding more people to the team is not the answer. Case in point is Citigroup, which had a team of approximately 30,000 risk and compliance employees on staff when it was fined $400 million.

The key to containing financial compliance costs is to have technology in place that connects siloed information. That way, you can understand what you’re facing, how everything interrelates – and instantly know if something is going wrong.


Financial service providers are naturally susceptible to cyberattacks because they handle so much sensitive financial information. And the more digitized your business, the more opportunities hackers have to reach sensitive data. Poor in-house security training and loosely enforced or inconsistent policies also heightens the chances of a security attack.

The cost of a cyberattack can be crippling. The average cost of a single data breach in the financial sector is $5.72 million. Financial service providers must invest resources into a risk management process that provides a holistic view of all risks to lower the likelihood of an attack and shorten response time in the event it does happen.

Environmental, Social, and Governance Issues

Customers, stakeholders, employees, and regulators are demanding transparency and accountability in ESG reporting. Regulators around the world have set roadmaps for mandating disclosures of environmental and social impacts – and companies in all industries are trying to figure out how to comply.

In the financial services industry, the Net-Zero Banking Alliance is a global group of banks that are committed to aligning their lending and investment portfolios with net-zero emissions by 2050. Representing about 40% of global banking assets, this group has agreed to publish emissions data annually in line with current best practices. The agreement targets the industry’s own carbon emissions, as well as that of those it lends to or invests in.

As more investors align their portfolios with net-zero targets, organizations will need to find an efficient way to track and report on important ESG metrics as part of their financial compliance strategy. But it won’t be easy. The amount of data needed far exceeds what can reasonably be managed even by a team of people. To meet expectations, you need technology that can efficiently collect and analyze relevant data throughout your entire value chain.

Data Privacy

Protecting clients’ sensitive data and personally identifiable information (PII) is crucial, but it can be particularly challenging given the number and complexity of data-privacy regulations.

GDPR opened the door to a flood of data-privacy regulations around the world. And the cost of noncompliance can be astronomical. Violators of GDPR, for instance, can be slapped with fines of as much as €20 million or 4% t of annual global turnover, whatever is higher. With so much at stake – both financially and reputationally – financial institutions must ensure that all of the policies, processes, and technology are in place to guard PII against misuse.

Technology to Support Financial Compliance

Financial compliance is a huge expense – and a huge responsibility. Invest in the right technology that will automate processes, drive down operating costs, and minimize your risk of expensive fines. The world of financial compliance will only get more complex – and regulators will be watching. Make sure you have what it takes to take on the challenges that await.