Compliance as a Strategic Investment

June 7, 2024

Introduction

Is your financial institution overlooking its greatest asset? In today’s competitive market, many companies undervalue the role of compliance.

Financial services companies – whether banks, traditional MSBs, or innovative FinTechs – often become blinded by competition, enamoured with rapid growth, market size, and the allure of capturing market share and growing revenue. The financial technology sector is celebrated for its ability to innovate swiftly, disrupt markets, and adapt to consumer demands. However, this excitement and investor validation can overshadow a critical truth: market size and growth speed mean little if a financial institution fails to operate compliantly and manage its risks effectively.

The Value of Compliance

Compliance is not just a regulatory box to check; it’s a vital component of a robust financial operation. Without adherence to regulations that ensure safe and sound operations, prevent abuse by criminals for money laundering and terrorist financing, and protect consumers, even the most innovative businesses can fail. The ability to pivot quickly or build a large customer base is of little value if a company fails to meet regulatory standards, resulting in fines, reputational damage, or even loss of license or banking partners. Both large and small MSBs can miss the mark and fall from grace.

The Role of Risk Assessments and Independent Reviews

As we’ve noted in other posts, Governance is the cornerstone and risk assessment is the foundation upon which the pillars are placed as part of building an effective risk-based compliance program that is reasonably designed.

Independent reviews, a “pillar” requirement under the Bank Secrecy Act, play a crucial role in ensuring that financial institutions understand and effectively mitigate their unique risks while maintaining effective risk-based BSA/AML and OFAC compliance programs. These reviews help identify potential weaknesses, correct course, and reinforce the institution’s commitment to lawful and ethical operations.

Risks of Underestimating the Value of Compliance

Viewing compliance, risk assessments, and independent reviews as mere cost centers or obstacles to business growth is a misconception. In reality, they are critical to a company’s success, sustainability, and positive reputation. If board members and executives fail to recognise the importance of compliance efforts responsive to its risk assessments and independent reviews, they may underfund compliance efforts leading to unaddressed gaps and unmitigated risks. Board members and executives who see compliance efforts only as an expense and necessary evil may also ignore the advice of compliance teams, internal audits, independent reviewers, and regulators about significant risks and necessary work.

Strengthening Your Culture of Compliance

Ten years ago, in August 2014, FinCEN issued guidance on the culture of compliance, noting, “Shortcomings identified in recent Anti-Money Laundering (AML) enforcement actions confirm that the culture of an organisation is critical to its compliance.” This insight remains true today. If your financial institution’s culture sees compliance as an expense item without a healthy respect for risk mitigation as critical to long-term success, it’s time to reflect on improving your culture of compliance.

Don’t let your institution fall into the trap of seeing compliance as a mere cost. Embrace it as a strategic asset and build a culture that fosters risk mitigation and long-term success.

Partnering for Success

At MSB Compliance Inc., we are excited to partner with Arctic Intelligence, a leader in innovative risk assessment technology. Together, we are dedicated to revolutionising how financial institutions, particularly in the U.S. MSB and fintech sectors, manage and mitigate risks. Arctic Intelligence’s advanced platform not only simplifies the risk assessment process but also enhances compliance with stringent regulatory standards and facilitates proactive risk management.

Through our partnership, we bring a powerful synergy that combines cutting-edge technology with deep compliance expertise. This collaboration empowers your institution to establish a robust foundation for success – grounded in comprehensive risk assessment capabilities and bolstered by our joint commitment to fostering a culture of compliance.

Explore how our partnership can strengthen your risk management strategy and ensure compliance excellence. Together, we are paving the way for a more secure and compliant financial environment.

Disclaimer:

This blog post is intended for informational purposes only and does not constitute legal, accounting, or professional services advice. Our team of professionals with expertise in BSA/AML and OFAC compliance uses AI tools like ChatGPT to support our writing process in different ways. Sometimes, AI is used to improve upon a draft we’ve written, while other times, it’s employed to synthesise and combine information from reputable sources, such as FinCEN, FFIEC, CFPB, FATF, and state regulatory bodies, around a concept or idea. In both cases, the final content is shaped and validated by professionals to ensure accuracy, clarity, and alignment with compliance standards. Since each institution’s compliance needs are unique, we recommend seeking advice from qualified professional experts in legal, accounting, or compliance consulting. The effectiveness of the strategies and practices discussed depends on your institution’s specific risk profile and tolerance, so customisation is advised.

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