Forecasting 2024 Compliance Challenges in FinTech: Custodia’s Insights

Post-financial crisis legislative frameworks like MAR, MiFID II, and Dodd-Frank have played a crucial role in upholding market integrity and rebuilding trust in the financial services sector, as stated in Fintech Global News. These frameworks have broadened the scope of electronic communication and trade surveillance requirements, expanding the range of market segments subject to record-keeping obligations.

As we approach the end of 2023, Custodia‘s Regulatory Affairs Team has conducted a comprehensive evaluation of the impending challenges in the financial services industry, identifying key compliance hurdles expected in the coming year.

The transition to digital systems and the growing complexity of communication data have compelled global regulatory bodies to emphasize the importance of meticulous tracking and auditing. Capturing the context of data is vital to justify trading activities and adhere to market abuse regulations. Financial institutions are now confronted with the task of ensuring compliance across multiple communication platforms, including email, instant messaging, and emerging technologies, while also ensuring that this data remains accessible for eDiscovery and regulatory requests.

Custodia highlights that the challenges in building a robust audit trail are manifold. Issues such as unauthorized off-channel communications, unmatched conversations, inconsistent documentation, and data silos underscore the critical need for meticulous record-keeping and flexible data management strategies.

The proliferation of electronic communication channels has led to the SEC’s mandate to capture all business-related communications becoming more extensive. The blending of personal and professional communications presents difficulties in identifying and retaining relevant business discussions, particularly with the rise in encrypted and ephemeral messaging in remote work settings.

All financial services market segments, including asset management firms and broker-dealers, are under increased pressure to enhance their compliance capabilities to meet US regulatory record-keeping requirements. This situation underscores the urgency of adopting a proactive approach to compliance.

The adoption of cloud technologies within financial institutions has been steadily on the rise, a trend expected to persist as companies accelerate their digital transformation efforts in a post-pandemic world.

The interconnection and digitalization of financial markets have prompted regulatory bodies worldwide to focus on how financial firms manage and comply with a diverse range of regulations related to digital data capture. This global perspective on compliance introduces unique challenges for compliance units within these organizations.

Custodia’s insights shed light on the anticipated compliance challenges that the FinTech industry is poised to face in 2024. As the financial services landscape continues to evolve, it becomes imperative for organizations to remain vigilant, adaptable, and proactive in their compliance efforts to navigate the complex regulatory environment effectively. Custodia’s Regulatory Affairs Team provides a valuable roadmap for financial institutions to tackle these impending challenges head-on.