What is banking compliance?

Charlotte Miller

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What is banking compliance?

Banking compliance, much like it sounds, is the regulation of banking operations. It is becoming evermore important as the fintech industry expands. As it does, banking operations are becoming more digitised, automated, and globalised, making for a lot of compliance issues. A lot of new compliance solutions have been implemented in the past couple of decades as this technology has expanded and become more mainstream. Nowadays, banking compliance involves contactless payment methods, crypto and NFTs and other issues that would not have been imagined even a few years ago. 

To better protect your business and adhere to compliance solutions in banking regulations, take a look at our guide to banking compliance. 

Money laundering and terrorism funding

It is not unusual for individuals who have perhaps gained funds through unethical means, to then use the products and services of financial firms and banks to launder their money. Financial firms cannot be seen to encourage or tolerate this, and there is a lot of compliance solutions and regulations in place to ensure that any suspicion of money laundering is detected and reported and shut down. 

Why is this so important? Well, besides the illegality of money laundering, the other half of anti-money laundering compliance is the motives behind it. A lot of other compliance solutions revolve around counter-terrorism funding, which money laundering is a common motive for. Money laundering and counter-terrorism funding are two very hot topics amongst financial compliance sectors and a prime goal of the Financial Conduct Authority to suppress. 

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Cryptocurrency is still a new concept, and as such as it becomes more mainstream regulators are fighting to keep up with the ever-evolving state of cryptocurrency and the culture around it. Stories of scams, the high volatility of coins, and the permanent nature of transferring funds has put a lot of financial regulators on edge and has a lot of financial firms seeing money signs. 

The UK’s official authority on finance regulation, the Financial Conduct Authority, does not appear to like cryptocurrency at all, saying that customers should “expect to lose all [their] money”. 

Regulation is trickling in, but creating laws was never a fast process, so in the meantime authorities are issuing DCAA compliance on known scams, unethical practises and advertising, etc. like they would be applied to real world national currency. 

All this is enforced by the fact that cryptocurrency is the latest and easiest way for individuals to go about their money laundering and terrorism funding schemes. However, authorities have pointed out that these are still regulated, despite the currency. 

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Data collection and cybersecurity

Another aspect that banking compliance has to think about is the data. Data is a very valuable asset, to the point that a lot of people are arguing that it holds more value than gold or oil, and it’s important that it is sourced ethically, stored securely, and used ethically. 

Not least amongst worries with this is the security aspect. Whether it’s the customer accessing their banking information or their data is stored with the business, it’s important that the security holding the data is up to scratch. Modern regulations tend to vouch for three-factor authentication to allow customers to access their banking accounts and IT experts are recommending hosting customer data on the cloud due to its superior security measures. 

Although cybersecurity is more enforced in broad strokes, like making sure your business’ security is up to par, regulatory authorities are likely to crack down on cyber risks. In fact, it has been the subject of the most skilled person reviews by the FCA for the past three years.