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Most Financial Institutions agree that we live in an ever more complex regulatory landscape.
Even the finest compliance officers can’t keep up with the increasing scope of financial regulations, new inter-disciplinary rules and statutes, not to mention the mandatory collaboration with supervisory authorities and local regulators.
How to set up a Legal and Regulatory Watch Program ?
The financial regulatory landscape has taken a tremendous flight in recent years and will become even more challenging in the future. The cost to keep pace with changes and manage the scrutiny from the regulator to meet the deadlines requires a global and holistic approach.
Legal and Regulatory Watch entails close interaction with the different stakeholders within the financial entity. The purpose is to cover all obligations regarding the laws and regulations.
Within a group context, it is advisable to build alignment to avoid that regulatory shopping exists. This is one of the major lessons learned from the financial crisis whereby the loosest rules and laxest regulators were chosen to develop the business.
Does the Legal and Regulatory Watch have to be organised by the Compliance Team?
In most organisations the watch will be managed by the Compliance Team. Furthermore, adding stakeholders (Legal Department, Business Operations, etc.) allows combining core skills, knowledge and regulatory awareness. The variety of professionals will embrace the compliance business challenges from the start.
To cover the legal and regulatory aspects, we take into consideration the subset of different laws and regulations into force, allowing key-alignment with the legal principle of the Hierarchy of Norms.
Mapping and creation of a Regulatory Watch System
A good practice is the top down approach whereby the scope of the changes of the law, the deadlines, the progression, the changes for the business requirements and the final owner or manager are mapped out.
This mapping technique allows to develop a roadbook for the executive management and ensure compliance throughout the adjustment of new applicable set of laws and regulations.
Mandatory steps for strong Legal and Compliance Regulatory Watch
1
The definition of the roles and responsibilities of stakeholders. The Reporting modalities, the frequency of the meetings, the decision tree, ...
2
The gap analysis should feed into the compliance risk assessment. The impact analysis and evaluation on the business model and/or the products commercialised, …
3
Ownership can be stimulated if the executive committee becomes the sponsor of the project related to the regulatory change (ex-given: the responsibility of the MLRO for AML)
4
Transversal Project approach is key to track all elements and completion of required changes throughout the project lifecycle
5
Having in place a strong documentation methodology is essential for audit trail purposes
Can the Legal and Regulatory watch be outsourced?
In our expanding financial regulatory context, outsourcing a Regulatory Watch Program to an external RegTech company or independent compliance consultant can become an appealing solution for financial institutions.
In many cases, it is a cost-efficient solution, but the final responsibility stays within the corporate board.
Being outsourced (even to an internal group entity) necessitates controls that must be put in place to check if the third-party is a significant subject with numerous business impacts.
Following different channels of information from regulators and international bodies, and evaluating the impact on the organisation requires industrialisation of the process.
By using external resources (human and IT), the management of a Regulatory Watch Program can tackle the numerous challenges. It allows to gain in-house industry experience and speed up the department's performance, as it proves to be a full-time job.
We help companies build their Regulatory Watch Programs
The governance can be organised in a tailor-made way. There is no right or wrong in the implementation of governance, as every financial institution’s business model is unique.
The target operating model will be built to organise this efficiently and to stimulate the automatism to flag the changes in laws, regulations or market rules.
The final ownership by the Compliance Department, the Legal department or even by other departments within your organisation will be part of the evaluation.
The outcomes are the updates of internal policies, procedures and systems according to the regulatory watch process.
With you along the road
Within the rapidly evolving regulatory world, we can help you organize your regulatory compliance system and support your team with our exclusive industry observations and repeatedly proven best practices. Our comprehensive compliance solutions and our network of compliance colleagues are here to help you find clarity and assist you in conducting business in the regulatory landscape to which your organization needs to comply.
In our expanding financial regulatory context, outsourcing a Regulatory Watch Program to an external compliance consultant can become an appealing solution for financial institutions as it is cost-efficient, quicker to manage, and it allows them to gain in-house industry experience. At Pideeco we can help you to:
- Create a tailor-made Regulatory Watch Program for your company’s business model.
- Update or draft internal policies, procedures, and systems according to your regulatory watch process.
- Map out the scope of the changes of the law, the deadlines, the progression, the changes for the business requirements, and the final owner using a top-down approach.
- Develop a roadbook for the executive management and ensure compliance throughout the adjustment of new applicable set of laws and regulations.
- Define the roles and responsibilities of stakeholders within the program (the reporting modalities, the frequency of the meetings, the decision tree, etc.).
- Perform a gap analysis that feeds into the compliance risk assessment with implementation dates.
- Set up a strong documentation methodology that is essential for audit trail purposes.
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