As the year 2024 progresses, the US regulatory landscape in the financial sector has been consistently shattered due to major regulatory challenges. The industry is going through versatile regulatory obstacles that could noticeably influence its operations. The industry is evolving, with the newest technologies transforming customer outlooks, and bringing significant reforms. Meanwhile, regulators are executing new policies and rules that objectively safeguard enterprises and ensure the financial system’s stability. In this instance, financial service providers must remain current with the emerging regulatory demands to deal with the reforming landscape and stay compliant with the latest regulations. Companies are adopting effective regulatory management software solutions to tackle such challenges. In this blog, you will read about various recurring and familiar regulatory challenges where financial institutions pay continued focus.

Familiar Concerns and Recurring Regulatory Challenges

Regulatory challenges are now considered a recurring theme as financial institutions in the US are moving to evolve. Regardless of the execution of emerging regulations, various familiar issues have remained the same, creating significant challenges for financial organizations. In this section, we will walk through some recurring regulatory challenges and how they influence the financial industry as well as regulatory management software playing a prominent role in streamlining overall operations.

Anti-Money Laundering (AML)

The first and most noticeable regulatory challenge that financial enterprises experience is compliance with AML regulations. The US government has been working for years to stop the misuse of the financial sector for money laundering along with other illegal activities. Therefore, financial organizations must set up effective AML programs and utilize regulatory management software with rules, processes, and measures to find and stop suspicious conduct. Despite banking institutions’ maximum efforts, AML compliance remains a serious barrier.

The primary reason is the persistently transforming nature of illicit activities, including money laundering. Criminals are relentlessly exploring the latest ways to transfer money via the financial system, making it challenging for financial enterprises to keep up. Moreover, the massive quantity of financial transactions makes detecting suspicious acts challenging.

To deal with this challenge, financial organizations are investing heavily in technology platforms such as regulatory management systems to comply with the related regulations. Such solutions utilize advanced algorithms and artificial intelligence to observe vast amounts of financial data and detect patterns of attitude that can reflect money laundering or other related activities.

Cybersecurity

Another repeating regulatory hardship for the financial sector is cybersecurity. As financial institutions become more reliant on technology, the risk of cyber-attacks has grown progressively. Cybercriminals continuously search for tactics to exploit vulnerabilities in the economic organization system and networks, while companies become cautious and modify their cybersecurity strategies as per the situation’s demand. One of the best solutions is to adopt effective regulatory management software that can facilitate compliance with appropriate regulatory demands and to implement fruitful cybersecurity policies and procedures.

Data Privacy

The third most common challenge that is being experienced by financial companies is the requirement to comply with regulations associated with data privacy. In this decade, the progressive concern among regulators and consumers is in regard to managing customer data. This has brought the execution of many rules in the regulatory management, involving the California Consumer Privacy Act (CCPA) in the United States and the General Data Protection Regulation (GDPR) in the European Union. One of its solutions is adopting regulatory management software to ensure all the data privacy regulations are followed.

New Concerns and Emerging Regulatory Challenges

There has always been strict regulation of the banking and financial services industry throughout the US for a valid reason. The financial sector is essential to the economy, and financial organizations’ decisions can significantly impact both enterprises and the consumers. As 2024 progresses , the regulatory environment is changing again, with novel problems and new difficulties taking center stage. In the following paragraphs, we’ll look at some of the most important regulatory issues the U.S. financial services sector is now dealing with and how regulatory management software can assist.

Rapid Pace of Technological Change

The swift pace of technological advancement constitutes one of the most significant issues confronting financial services companies. New technologies like blockchain and the Internet of Things are revolutionizing financial solutions, and authorities need help to catch up. On the one hand, leaders understand the possible advantages of these technologies in terms of regulatory management software, including improved effectiveness, cheaper costs, and enhanced security. On the other side, they have reservations about the risks connected with these advancements identified in regulatory management systems, including data privacy, security, and systemic risks.

Regulators are approaching technology more proactively because of these issues. For instance, the Commodity Futures Trading Commission (CFTC) recently created a fintech consulting council to offer feedback on developing technologies, whereas the Securities and Exchange Commission (SEC) has formed a new section focusing on fintech and development. Regulators are simultaneously striving to create relevant laws and regulations to address the risks connected to these technologies. An effective regulatory management software can visualize all the emerging rules released by different regulators so that companies in the US can stay updated.

Rise Of Non-Bank Financial Institutions

Expanding non-bank financial companies is another recent challenge for the financial services sector. Regulators are debating how to ensure these organizations are appropriately regulated because conventional banks come under increasing rivalry from fintech firms and other non-bank businesses. It is common for non-bank financial organizations to conduct business outside of the established regulatory structure, leading to monitoring gaps and increased risk of damage to consumers. Regulatory management software is one of the most effective software that can assist in monitoring FinTech operations.

Regulators are investigating novel regulatory management system strategies that emphasize results to overcome this difficulty. For example, the Office of the Comptroller of the Currency (OCC) is considering an amendment that would force financial technology businesses to get charters as national banks, exposing them to identical regulatory standards as regular banks. Meanwhile, The Financial Stability Oversight Council (FSOC) is investigating novel strategies to track and manage systemic risk in finance. Adopting regulatory management software can facilitate fruitful processes for streamlined RCM.

Cannabis

Cannabis is a new problem and regulatory challenge for the American finance sector. Although the federal government still identifies cannabis as a classified in Schedule I substance under the Controlled Substances Act, numerous states have authorized its usage for therapeutic or recreational reasons. Banking institutions that assist cannabis-related enterprises must navigate a complex regulatory landscape since doing so puts them at risk of breaking the law on the federal level. Federal advice on this subject is lacking, resulting in discrepancies between state and federal legislation that can be checked through regulatory management software, confusing financial institutions and impeding the development of the cannabis business.

Consequently, financial companies that want to support the cannabis business must traverse a complicated web of restrictions and risks, including the risk of criminal charges, losing their FDIC insurance, and damage to their reputation. This makes it crucial for financial institutions to keep up with the most recent advancements and laws on cannabis through a regulatory management system to successfully handle these new issues.

Proactive Strategy for Major Regulatory Challenges

Businesses must embrace a proactive approach to address the main regulatory challenges that the financial services sector in the U.S. will face. One approach to achieve this is efficient software that can assist in real-time risk identification and mitigation. The Predict360 regulatory management software is an effective tool that can help financial organizations adequately manage their compliance requirements and stay on top of regulatory changes.

Financial institutions can expedite risk evaluations, automate compliance operations, and provide reports that help meet regulatory standards with the Predict360 RCM software. The software offers a thorough overview of compliance risk throughout the organization, enabling businesses to spot emerging issues and take preventive measures before they worsen. By adopting this approach, companies can prevent exorbitant costs, penalties, and negative publicity from non-compliance.

Overall, implementing a proactive strategy and utilizing a powerful regulatory management software, such as Predict360 RCM software, could assist financial institutions to manage their compliance requirements successfully in the continually evolving economic environment and staying ahead of regulatory management system challenges.