Compliance teams are facing escalating pressures driven by greater regulatory scrutiny and macroeconomic challenges, according to the 2024 Annual Compliance Health Check Report from SteelEye’. This is the third Annual Compliance Health Check report which surveyed over 400 senior compliance decision makers at financial institutions across major financial centres in the US, UK, APAC, and Europe.
The survey found that only 56% of firms are investing in communications surveillance, and despite the continued rise in regulatory expectations, expenditure on compliance operations has decreased compared to 2023. This data suggests that compliance investment has been de-prioritized amid other cost pressures linked to geopolitical and economic pressures, such as ongoing global conflicts and persistent inflation.
Between 2023 and 2024, persistent macroeconomic challenges, compounded by the Middle East conflict, continued to shape the compliance landscape, impacting budgets and technology projects. Large-scale banking failures forced compliance teams to tighten controls. Regulatory dynamics also shifted, with fewer firms finding regulatory interactions easy and an anticipation of increased fines for record-keeping breaches. Regulatory scrutiny over off-channel communications also remained intense, prompting firms to introduce monitoring of new channels, albeit with only 37% currently monitoring platforms like WhatsApp. Moreover, despite technological advancements, approximately a fifth of compliance officers’ time is still consumed by manual or repetitive tasks. These trends collectively signal a challenging compliance outlook marked by ongoing macroeconomic uncertainties, heightened regulatory scrutiny, and evolving enforcement priorities.
Despite financial firms expressing intentions to allocate more resources to compliance, the present reality reflects the opposite, with over a third (36%) of tech projects related to compliance being scrapped amid persistent macroeconomic challenges. There is also evidence of the potential for employee burnout, with on average a fifth (21%) of in-house compliance teams burdened by manual and repetitive tasks.
In addition, the data found that the majority (63%) of financial institutions are not currently monitoring platforms like WhatsApp for compliance. This comes amid heightened regulatory scrutiny around the use of electronic communications platforms, as demonstrated by SteelEye’s 2023 fine tracker. Last year alone, fines totaling $549 million were levied across Wall Street for failures to maintain records of electronic communications by staff on messaging apps.
Whilst the report indicates that 69% of firms expect the value of fines doled out by regulators to rise, and 63% expect the volume of fines to rise, budgetary priorities at financial institutions are not matching the needs of compliance teams. Regardless of the optimism from compliance officers to intensify their efforts, the reduction in compliance expenditure will have severe regulatory and burnout repercussions if not prioritised by senior leadership.
Commenting on the findings, Matt Smith, CEO of SteelEye said, “As regulatory scrutiny intensifies and macroeconomic challenges persist, it’s no secret that the ‘unsung hero’ compliance teams are under unprecedented pressure to meet increasing regulatory demands. With investment in technology solutions not keeping pace with the need for compliance support, senior leadership should be on the lookout for evidence of burnout in their ranks. There’s also a very real possibility that compliance teams will be unable to fulfill their responsibilities as the regulatory burden becomes unmanageable for compliance functions.
“Embracing smarter, more efficient approaches to compliance is essential for navigating the evolving regulatory environment effectively. We now have evidence that those attempting shortcuts have a target on their back that the regulators are not afraid to aim for, meaning compliance teams require the adequate tools to effectively comply before they run out of steam to do so.”
SteelEye, winners of the A-Team RegTech Insight Best e-Comms Surveillance Solution award in 2023, offers comprehensive compliance solutions for the financial industry, including integrated trade and communications surveillance, trade surveillance and supervision, communications monitoring and surveillance, archiving and trade reconstruction, MiFIR transaction reporting, and best execution and transaction cost analysis (TCA). It’s designed to provide financial firms with holistic oversight of all trading and communications activity, enabling them to comply with confidence.
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