COLUMN – VINOD JAIN | Through the past ten years, the landscape of financial oversight and risk management has seen a transformation that is nothing short of remarkable. Join Vinod Jain for a look at the progress made – and the challenges that still lie ahead.

In the intricate world of financial markets, the rhythm of regulatory reporting has evolved into a complex symphony. Global regulators, market participants, and solution providers have made tremendous strides in bringing transparency to the reporting of trades, transactions, lifecycle events, valuations, and collateral movements. Over the past decade, we’ve witnessed a remarkable transformation in how the financial industry approaches transaction reporting and compliance. 

Compliance seeking assurance

As the regulatory environment has grown more sophisticated, so too have the solutions designed to address reporting challenges. These systems have undergone multiple iterations, each version more refined than the last, aiming to capture the nuances of an ever-changing financial ecosystem. However, despite these advancements, compliance teams still find themselves searching for assurance regarding the accuracy and completeness of their reporting efforts. The persistent challenges of under-reporting, over-reporting, and incorrect reporting continue to be a thorn in the side of compliance professionals. These issues not only pose regulatory risks but also undermine the very transparency that reporting systems aim to achieve.

The multifaceted nature of compliance

This new symphony of trade and transaction reporting requires the harmonious integration of multiple systems. Each of these components must play in perfect rhythm to create a melody of compliance. The slightest discord in any one system can lead to reporting inaccuracies, potentially drawing regulatory scrutiny and undermining market integrity.

“This new symphony of trade and transaction reporting requires the harmonious integration of multiple systems.”

According to Struan Lloyd, Head of S&P Global Market Intelligence Cappitech, “[c]omplexity in trade and transaction reporting along with keeping pace with the many regulatory updates is proving to be both costly and challenging for many firms.  As regulators around the world hone in on the quality of the data reported, it’s more important than ever to get reporting right the first time, but also to ensure firms have a robust control framework to ensure the completeness, accuracy, and timeliness of the data being submitted”.

Compliance with trade and transactions is a multifaceted endeavor that extends far beyond mere reporting. A comprehensive approach ensures that firms not only meet the letter of the law but also embody their spirit in their day-to-day operations. The melody of assurance is based on 

• Identifying the applicability of regulations to a firm’s specific business activities
• Providing clear and actionable guidance on regulatory requirements
• Monitoring the implementation of actionable guidance for assurance 
• Initiating corrective actions when deviations are observed
• Monitoring the implementation of corrective actions for assurance 

The demand for automated compliance monitoring

While great strides have been made in automating various aspects of regulatory reporting, the monitoring of global compliance still relies heavily on analyzing the data set in large workbooks, scanning emails, and multiple pages of PowerPoint, and viewing the auditing processes as a check box exercise. This approach is not only time-consuming and resource-intensive but also prone to human error. 

The increase in the regulatory enforcement action indicates the gaps in the current assurance solutions. The time has come for compliance departments to embrace their technological solutions for assurance. These tools should be capable of:

• Linking cross-border regulations to create a comprehensive compliance framework
• Tracking compliance against this framework in real-time
• Providing automated alerts for potential violations or discrepancies
• Generating comprehensive reports for internal and external auditors

By adopting such solutions, compliance teams can shift from a reactive to a proactive stance, identifying and addressing issues before they escalate into regulatory violations. A robust compliance assurance solution could estimate the penalty/ fines before regulators’ action. As the complexity of reporting has increased, this is the apt time to automate the compliance monitoring process. 

Conclusion

As the financial world continues to globalize and regulations become increasingly complex, the need for robust, automated compliance assurance tools has never been greater. By embracing these technologies, firms can not only reduce their regulatory risk but also gain valuable insights into their operations, ultimately leading to more efficient and transparent markets.

The melody of assurance in transaction reporting and compliance is still being composed. With the right tools and approach, we can ensure that it resonates clearly across the global financial landscape, creating a symphony of transparency, accountability, and trust.

Vinod Jain is Strategic Advisor, Capital Markets, with Datos Insights, and based in New Jersey. His column with PostTrade 360° lets him highlight details worth noting, from various corners of the post-trade operations landscape.