As regulatory compliance duties expand, it is more critical than ever to have a clear view of your performance in terms of good governance and compliance.
Organisations have reacted to this problem by establishing more severe compliance monitoring processes. Both larger and more sophisticated firms, as well as smaller, simpler ones, confront challenges in meeting their commitments across all of their divisions.
Here, we will look at what compliance monitoring is and why it’s so vital in today’s regulatory-heavy company context.
Compliance monitoring is quality assurance testing for firms to ensure that their company operations fulfil regulatory and internal process requirements.
The need to monitor compliance performance is often a regulatory obligation; for example, authorities such as the UK’s Financial Conduct Authority or the International Organization for Standardisation require enterprises requesting operating clearance to outline their compliance monitoring strategies. Ongoing, the strength of an organisation’s monitoring processes may be a key pillar of compliance with the standards that govern it.
An organisation must work together to manage compliance, yet most users need assistance. Depending on the company, compliance monitoring may be handled in-house or planned and overseen by a third-party consulting team. Whether in-house or via a third party, staff and management must be engaged throughout the process.
Employees must be trained on the significance of compliance and how to carry out operations that adhere to rules. Employees who are informed are responsible to their bosses as well as for compliance. Managers conduct periodic audits on staff to verify that they are constantly in compliance with rules.
Larger businesses designate a dedicated function for compliance monitoring, which is generally backed by a third-party consulting firm to verify that all criteria are satisfied. This job is crucial in financial institutions where the Financial Industry Regulatory Authority (FINRA) establishes regulatory compliance monitoring. Compliance rules are often updated and altered over time; therefore, a compliance officer’s work will entail keeping up with the most recent modifications.
Monitoring guarantees that your organisation’s activities are ongoing and functioning correctly. More generally, it can detect any instances of violation, whether with internal rules or external laws, whether unintentional or malicious. However, compliance monitoring may have a beneficial influence across the firm.
These include the following:
Monitoring may assist an organisation in demonstrating that proper processes are the norm and that they are typically rigorous in enforcing them by recording the presence of a process. This helps to limit the detrimental effect of any instances of noncompliance that sneak through the cracks.
Monitoring is an essential first step in improving performance, whether in compliance or any other aspect of operations. Understanding your current situation is the critical first step toward progress. You can only be certain that you’ve found flaws in your strategy if you’ve created a complete scorecard and run thorough tests on it. It’s no surprise, therefore, that monitoring your present strategy is one of the five steps of an efficient compliance program.
In many circumstances, such as the UK’s FCA, proving a rigorous and thorough compliance monitoring program is critical to obtaining or maintaining regulated status.
The detailed audit trails generated as a matter of course by automated compliance solutions can be highly beneficial here, reducing the risks and potential for errors when manually collating records, as well as increasing efficiency by reducing the paperwork and admin your compliance, risk, and audit teams must deal with.
Compliance monitoring is not just the law — it’s a key part of managing risk and running your business well.
Dive into business challenges and the specific methodologies to get ahead:
Compliance is only as solid as your data management, and in many organisations, it has become difficult to see where their data originates or how it is stored and used. Sensitivity of information varies depending on the industry: healthcare data, financial records, and intellectual property are all handled and classified differently.
Solid data classification, encryption, and auditing are indispensable. The former is not well standardised, so if you do it while employees are working remotely, they might process data against your company policy. Employees also need to be trained on what their roles entail in processing this information.
And even for those companies that are complying, proving so can be difficult. “My sense is companies are already in a situation where when the auditor or regulator comes knocking — and most have, since GDPR — they can’t demonstrate to them that they’re fully compliant, they’d just be taken to court.”
Establish a systematised compliance reporting protocol. Documentation will be required, and a detailed recording of how your firm meets the many rules will be key to verifying compliance.
It’s one of the most complex parts of Compliance monitoring through the ever-evolving rules and regulations across the industry. Businesses in the healthcare, financial services, and technology fields are held to comply with laws and must proactively observe, report, and control all operations. The growing confusion arises from varying compliance needs across regions and keeping up with shifting standards.
To navigate these waters successfully, you need to be aware of any regulatory changes. Companies may benefit from a dedicated staff that tracks and analyses regulatory changes.
Regulatory technology (RegTech) solutions, which automate monitoring for compliance and inform of changes in rules, can also help expedite the process by not relying on human tracking of progress. Several companies also hire outside counsel to help manage regulation and compliance.
Amongst the myriad industries, compliance is a challenge; however, there seems to be a larger lack of skilled personnel who can grasp the intricacies of what they need to comply with.
Legal vs IT/Security Focus
Often, there is a gap between lawyers looking at all things legal and IT/security rolling up their sleeves to do control testing. This results in nebulous enforcement.
Forming a cross-functional team that includes legal, IT, and compliance talent may help close the distance. In addition, it is vital to train and upskill staff regarding compliance responsibilities.
Technology is essential for remaining compliant, but getting new technology in the door might be challenging. And many organisations are trying to integrate their legacy systems with modern compliance demands, particularly as they adopt cloud computing. It can be hard to see how such technologies drive compliance, especially if there is a tech debt and legacy systems being used.
A lot of businesses in the current environment deal with many third parties, and vetting those third parties for their own compliance is quite a process. Third-party Compliance monitoring is becoming a bigger issue as it may impact your company’s entire risk profile.
A strong third-party risk management approach is essential. This includes effectively expressing compliance goals, performing regular audits, and examining third-party providers to ensure they meet your company’s compliance criteria.
Balancing compliance and efficiency is a challenge for most businesses. Heavy-handed enforcement often results in operational disruptions, especially when customers are clamouring for their business (like in e-commerce or financial services).
This includes connecting corporate objectives and compliance requirements and making compliance feel like an enabler rather than a blocker.
It can be challenging for most companies to train their staff on Compliance monitoring. 18 knowledge is risky: mistakes are easily made, unintentionally putting data at risk, which can have profound compliance implications.
Employee training – Refresher and regular employee training on compliance and security steps are necessary. Instilling a theme of compliance underpinned by employees placing these actions at the top of their to-do lists may also mitigate risk.
The successful monitoring of compliance should be part of a global strategy, including people with different roles, rules, and operational practices.
Et voila, a few simple things you should consider to set up your compliance monitoring.
Compliance risk assessments might help companies identify potential non-compliant areas and determine associated risks.
The businesses could then prioritise these risks and allocate resources to the areas they feel are most at risk. For example, many companies have their own standards, like HIPAA for healthcare and PCI for financial services.
After establishing the compliance risks and issues, a compliance policy must be built. This policy would also have transparent compliance processes and would be well understood by all staff in the corporation.
Remember, you cannot do effective compliance monitoring if you don’t have a Compliance Policy. It sets an organisation’s standard for what behaviour is compliant and legal, and compliance oversight ensures that people are abiding by these rules continuously.
It is essential to recognise that compliance is not done by the compliance team only. It is possible to monitor compliance effectively, so long as you have a few departments and personnel within the organisation.
Training employees allows everyone in the organisation to know that they are responsible for the company’s compliance. Regular training should be given to all relevant staff, including senior management, who are responsible for leading by example and promoting a culture of compliance throughout the firm.
Companies need to constantly test that their monitoring and compliance programs are successful at flagging risk and acting swiftly.
Technology-enabled solutions, e.g., compliance management software such as
SIEM
It can help automate this testing process using continuous monitoring, which means that the SIEM tool collects and analyzes information in real-time to determine compliance levels.
Where companies uncover instances of non-compliance, they should quickly fix the problem and set up a plan for addressing the issue so it won’t recur.
Corrective actions could range from altering internal policies and procedures, improving staff training, re-evaluating the way the firm is run, or investing in better compliance systems.
And compliance teams should think about monitoring and logging what they do to fix problems, so that fixes are more widely and consistently implemented.
Compliance procedures and monitoring approaches for detailed compliance monitoring need to be reviewed and adjusted as applicable for rule or corporate practice changes, as well as technological advances.
Compliance is a moving target; so to be effective, a compliance program needs to be current and flexible enough to respond as the risks and regulations evolve.
Some companies do their own internal audit as well as a risk assessment. Internal audits, instead of compliance audits, are usually performed by an independent (external) company or the internal audit department within an organisation.
As a result of their independence, internal audits could add even greater rigour and checks and balances to companies, especially larger ones. They could also serve as a historical record of compliance efforts and be shared with regulators as evidence of preparedness in the event of a regulatory audit.
Maintaining compliance is essential for any business, ensuring adherence to legal, regulatory, and industry standards. Use this quick checklist to streamline your compliance monitoring efforts:
Identify all relevant laws and standards (e.g., GDPR, HIPAA) that apply to your industry and location.
Maintain up-to-date, clearly written policies and procedures reflecting regulatory requirements.
Regularly train staff on compliance policies, emphasising their role in maintaining standards.
Conduct periodic risk evaluations to identify and mitigate potential non-compliance areas.
Ensure secure handling, storage, and access to sensitive data, with robust cybersecurity measures in place.
Utilise software to track compliance metrics, flag anomalies, and generate reports for audits.
Have a well-defined plan for addressing violations or breaches promptly.
Schedule internal or third-party reviews to verify ongoing adherence to requirements.
Consistent monitoring and proactive adjustments can safeguard your organisation and enhance trust with stakeholders.
Compliance monitoring software enables businesses to establish effective and regularly monitored control frameworks that not only address problems but also show compliance to stakeholders — primarily when supported by advanced tools like the KYC Hub Global KYB Solution, detailed governance and compliance are not optional; compliance software may be useful in smoothing the route to more rigorous reporting and, as a result, a more compliant organization.
Organisations can enhance their compliance maturity by adopting technology-driven workflows that streamline monitoring, automate reporting, and strengthen overall governance structures. With evolving regulations and increased oversight, having a centralized and intelligent compliance ecosystem becomes essential for long-term resilience.
For tailored guidance or to explore how these solutions can support your business, reach out via KYC Hub Contact Us.
