Compliance Management Best Practices for BFSI Industry


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The risk of non-compliance is one of the biggest and constant concerns financial-institution executives must mitigate. Regulatory organizations around the globe are focusing on evolving their rules to ensure all businesses adhere to all the compliance set by them.

Modern businesses in the Banking, financial services, and insurance (BFSI) sector must comply with compliance regulations like Know Your Customer (KYC), Anti-Money Laundering (AML), and others. Compliance leaders in financial institutions need to have strategic structural plans to ensure effective and efficient risk-and-control frameworks for better compliance adherence.

The following are the best compliance management strategies that decision-makers in the BFSI sector can consider:

Reach and Engage Everyone

It can be a difficult task to enforce regulatory compliance throughout the organization. With the increasing threat landscape, compliance officers in the BFSI sector find it more difficult to adhere to the rules. Organizations need to embrace workflows that are transparent and ethical to improve adherence.

Any resource’s smallest mistake can result in a significant compliance risk. Financial institutions should engage stakeholders, resources, and customers to identify suspicious activities and notify them to improve compliance. Businesses need clear and transparent communication with the entire workforce to educate the staff about compliance policies and updates. Simply engaging employees will not help organizations to have effective compliance adherence. Compliance decision-makers must design and implement an effective campaign for all regulation-related communications. Enterprises should launch these campaigns through channels that have a high impact.

Moreover, it is also crucial to reiterate the compliance policies constantly to ensure long-term behavioral change.

BFSI organizations can increase their compliance training engagement by utilizing recurrence features. This strategy will provide the user will get repeated messages until they acknowledge it. Financial organizations must keep compliance as one of their top priorities and send constant reminders or memory joggers to the users to ensure compliance.

Improve KYC Outcomes

Know Your Customer (KYC) is a time-consuming process, and most of the institutions in the BFSI industry rely on manual processes. Digitizing the KYC process will significantly improve speed and accuracy. Embracing digitization helps organizations to collect client data efficiently. Clients today can complete their KYC through mobile apps, web-based portals, and video tools. Integrating automation tools can help BFSI institutions to embrace public registers, third-party data providers, and KYC utilities into their KYC operations. Improving the KYC operations can help to boost efficiency by offering user guidance on policies and procedures and gathering transaction and product utilization reports.

Moreover, it will also enable users to archive files from past reviews and highlight relevant performance indicators in the dashboard. Embracing robust screening tools in the FinTech stack will filter news articles and reduce the number of alerts generated. Organizations that implement tools with built-in language-processing capabilities can reduce the rate of false positives in the screening process. Digitizing the FinTech stack will enable BFSI institutions to shift their focus from periodic to event-based KYC reviews, particularly for customers in the low-risk segments.

BFSI businesses can significantly benefit from digitizing KYC operations because it standardizes KYC processes across all the available locations. It is crucial to determine the clients that have a higher risk profile. To manage this compliance requirement effectively, BFSI institutions need a dynamic client risk rating (CRR) process that considers deviations between actual and anticipated product use and transactional behavior.

Optimize Screening

Most screening activities suffer because of the high volume of false positives. As a result, businesses need extra staff time to review and validate the false positives. Organizations can embrace AI-based tools in their FinTech stack to significantly reduce false positives by predefining detected alerts and creating a detailed note with a reason to disregard false positives.

Improving Transaction Monitoring

Systems monitoring transactions and generating alerts for suspicious transactions can also create false positives that might require lengthy investigations and constant follow-up. Implementing AI-based transaction monitoring tools on the FinTech stack will reduce false positives by improving the data quality and optimizing detection rules. Moreover, by levering network analysis, AI-based transaction monitoring tools can detect behavioral patterns that enhance segmentation and determine direct and indirect connections between clients and other users. Embracing transaction monitoring tools with inbuilt AI will streamline reporting by embedding evidence into a single document.


Technologies like robotics process automation (RPA) can enable BFSI compliance teams to manage alerts more effectively. Automation tools with embedded analytics will help to improve filtering. Moreover, it will also facilitate documentation and reporting of compliance management by minimizing manual work.

Transparent Cross-Department Communication

The enforcement of the EU’s General Data Protection Act (GDPR) in May 2018 has forced businesses to collaborate cross-department. Resources throughout the organization, including presales, sales, aftersales, compliance, and technology, must have effective alignment to ensure they meet all the compliance requirements.

Also Read: Six Digital Banking Myths Financial Organizations Must Be Aware Of

Transparent communication throughout the organization and with customers is essential to better compliance management practices. Decision-makers can design and enforce a distinctive brand identity for all the compliance messages and utilize it in all cross-department interactions. Embracing a predefined template for alert messages will help organizations to set a protocol that helps managers instantly identify the nature and importance of the compliance risk and act accordingly.

Compliance management is challenging for the BFSI sector because of the evolving rules and regulations across the globe. Organizations must enforce an effective strategy to identify and mitigate compliance risks in its nascent stages. There are various tools available in the market that decision-makers can integrate into their FinTech stacks to improve compliance management operations. BFSI institutions must be vigilant while processing every transaction to ensure that their organization adheres to all the regulations imposed.

Nikhil Sonawane
Nikhil Sonawane
Nikhil Sonawane is a Tech Journalist with TalkCMO. He has 4+ years of technical expertise in drafting content strategies for MarTech, Marketing Automation, and Customer Relationship Management (CRM). His Commitment to ongoing learning and improvement helps him to deliver thought-provoking insights and analysis on complex technologies and tools that are revolutionizing modern enterprises. He brings his eye for editorial detail and keen sense of language skills to every article he writes. If he is not working, he will be found on treks, walking in forests, or swimming in the ocean.


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