The complexity of today’s regulatory landscape demands more than standard checks and routine compliance processes. From thorough audit trails to real-time monitoring, regulatory authorities now require clear, verifiable and traceable evidence of firms’ proactive compliance efforts.
Compliance as a box-ticking activity does not work any longer – companies must demonstrate a robust system of traceability and accountability in order to avoid penalties, maintain their reputation and gain the trust of stakeholders.
The UK’s Financial Conduct Authority (FCA), for instance, emphasises the importance of robust compliance monitoring programmes that should include detailed documentation of all compliance activities such as monitoring reports, audit trails, incident logs to ensure transparency and accountability.
Traceable compliance is the obvious challenge that multiple companies currently face, and the more technology is embedded within the organisational structures, the more urgent and critical this need becomes.
The pressure is not only to adhere to regulations but to evidence that adherence clearly with an audit trail. This requires a strategic approach and a clear connectivity between regulatory obligations and actionable controls; by providing the proof that each regulatory obligation has a connection to a policy, procedure and control, true dynamic traceability can be obtained.
Why rigorous testing for validation and trust is important
The evolution of compliance requirements means that regulators and stakeholders alike are looking for more than just assurances – they seek verifiable evidence that systems work as expected. They want to see compliance evidence increasingly grounded in the reliability of diverse data types.
This shift places pressure on firms to adopt advanced compliance solutions that can both meet regulatory standards and withstand scrutiny through consistent and demonstrable results. However, relying solely on system assurances is not enough – firms must establish a proactive approach to monitoring, with a focus on transparency, accountability, regular system testing and validation to safeguard against oversights and regulatory breaches.
As financial institutions integrate compliance technology, building trust in these systems becomes of significant importance.
That’s why we stick to a rigorous testing approach when implementing technology at Corlytics. We have adopted a structured methodology for technology deployment, ensuring that every element of the system is checked and validated.
Because if compliance professionals cannot explain their processes clearly and what their technology is doing exactly to a regulator or to any other person, it is a potential red flag.
Metro Bank’s recent £16.7 million (discounted from £23.9 million) fine from the FCA is a case in point – being found guilty of “failing to address serious deficiencies in its automated transaction monitoring system implemented in 2016.”
Despite ongoing regulatory guidance, the bank’s transaction monitoring systems did not keep up with necessary compliance updates, raising red flags about insufficient risk assessments and customer screening processes. It was found that the system suffered from flaws in its setup and oversight, which went undetected for years, despite a junior compliance team member actually bringing this to attention.
High-profile cases like this show the risk of incomplete regulatory alignment and prove that “blindly” trusting your technology is not sufficient.
Dynamic traceability: how connected control environments ensure traceable trusted compliance
Our goal is to make regulatory compliance not only visible but also verifiable. A connected compliance environment not only enhances efficiency but also instills confidence in compliance professionals and regulators alike – a traceable link between regulatory obligations and the controls in place.
The US Department of Justice (DOJ), for example, emphasises the importance of dynamic compliance programs that are continuously evolving to address emerging risks and changing business environments. The DOJ expects compliance programs to be dynamic, with mechanisms for continuous improvement. This includes periodic reviews, updates in response to new risks or regulatory changes, the incorporation of lessons learned from past events or industry developments. This is not possible without creating an interconnected compliance environment.
Mapping all of the compliance content dynamically – from obligations to policies to controls – enables a level of visibility that was previously unattainable. This integrated approach allows institutions to respond swiftly to regulatory changes, adapt controls in real time, and ensure that compliance efforts are consistently in line with evolving standards.
By Paul Burleton, Head of Product, Corlytics