steeleye
Europe Regtech Trending

Now Is Not the Time to Go Cheap on Compliance Finds SteelEye as 76% Increase Expenditure

SteelEye, an integrated surveillance solution provider, has released a new report titled the Annual Compliance Health Check Report. It shows the majority (76 per cent) of financial services firms have increased compliance expenditure over the past year.

Heightened regulatory scrutiny across financial services last year was demonstrated in the SteelEye fine tracker which showed record penalties issued by regulators in 2022. These meant firms were under intense pressure to meet compliance standards. In response, financial firms spent a large proportion of revenue to keep up with the complex regulatory landscape. Nearly a third of firms (27 per cent) claimed that between 21 per cent and 30 per cent of their total expenditure was spent on compliance.

Investment trends

The data adds to the view that compliance teams are struggling to keep up with requirements. Furthermore, investment in technology to help reduce manual workloads (selected by 38 per cent of firms), and more regulation to comply with (32 per cent), were believed to be the two main drivers of the increased compliance expenditure.

Hiring and keeping the right talent was only selected by 21 per cent of firms. This suggests that compliance professionals are recognising the need to use a vendor to support compliance operations. Especially as regulators become ever-more demanding.

This trend is set to continue as more than two-thirds of firms (73 per cent) are expecting to invest more in regtech over the next 12 months. Compare this to 44 per cent in 2022, except now there are expectations that some of this investment will go towards external third-party solutions.

The report also found that 62 per cent of firms are concerned about traders and portfolio managers taking more risks in a recession environment. As a result, investment in compliance will continue to rise as firms look to monitor activity more closely.

Ensuring compliance

The SteelEye findings come following the scrutiny of governance and risk mismanagement in the wake of high-profile bank failures this year. Against this backdrop, the banking sector is spending the most on technology to support compliance efforts. Sell-side firms – including banks and brokers – are leading in terms of monitoring Microsoft Teams, WhatsApp, and Zoom.

54-62 per cent of banks are monitoring these channels, with 40-43 per cent having started to monitor them in the last 12 months. This compares to the year before when research showed that only 12-24 per cent of firms, banks and brokers were monitoring these channels.

Commenting on the findings, Matt Smith, CEO of SteelEye, said: “The recent banking failures are going to add further pressure on compliance teams in the financial sector. While our report shows that 2022 saw huge progress in the sophistication of compliance technology, as a result of an increase in investment across the industry, this level of investment will need to continue into 2023. Especially if organisations want (and need) to meet the mounting regulatory pressure that is expected in the fallout of the recent events.”

SteelEye’s second Annual Compliance Health Check Report surveyed 300+ senior financial services compliance and risk professionals about their current compliance concerns, priorities, and spending.

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

Related posts

The Growcery – Open for Innovation – Belgian Business Platform Launch

Manisha Patel

How Fintechs are Supporting the Hospitality Industry

The Fintech Times

This Week in Fintech: TFT Bi-Weekly News Roundup 22/04

Claire Woffenden