Blog Compliance

The ABC of financial service compliance


In today’s fast-paced and rapidly-evolving business landscape, companies are constantly seeking new and better ways to enhance their offerings, streamline operations, and provide exceptional value to their customers.

Although there are multiple paths to achieving these goals, one of the most transformative innovations that have emerged in recent years is embedded finance, also known as Banking as a Service (BaaS). This approach enables businesses to seamlessly integrate financial services into their products and ecosystems.

Better still, embedded finance can come with regulatory compliance modules, which are designed to take most of the wrangling about legal intricacies off your plate completely, and ensure that all your financial transactions are fully compliant with the highest standards.

Moreover, BaaS providers take pride in their flexibility when it comes to designing financial solutions tailored to clients’ specific business needs. With embedded finance, you can easily integrate all the financial services you require – accounts, payments, foreign exchange, debit cards, and more – into your client interface without having to worry about compliance.

In this article, we’ll explore the basics of regulatory compliance and how embedded finance can be your best ally in navigating this complex issue.

High cost of in-house compliance

Regulatory compliance is a critical aspect of any financial service that some businesses choose to address by forming an in-house compliance team. And while this approach can, no doubt, work, it does come with significant challenges, not the least of which is cost.

Maintaining a sizeable group of employees dedicated exclusively to handling all-things-legal tends to be prohibitively expensive. Put more precisely, the annual cost of this often amounts to around $1 million. 

Needless to say, a financial burden of this magnitude can be very hard, if not altogether impossible, to bear for startups and small to medium-sized enterprises.

Compliance outsourcing to the rescue?

Recognising the complexities and exorbitant costs involved in managing compliance internally, some companies opt to outsource this critical function to compliance service providers, which, however, comes with its own set of difficulties.

These include the generally time-consuming process of carefully selecting a reliable partner, managing the relationship over time, and shouldering the ongoing service costs.

Luckily, this is not where the story ends regarding your options when it comes to regulatory compliance. There is now a third, more efficient and comprehensive solution that’s been gaining in popularity with businesses, namely – embedded finance with built-in compliance.

The ultimate all-in-one solution

Embedded finance goes well beyond the traditional models of compliance management. By seamlessly integrating financial services into your website or platform, and taking care of the associated legal issues, it allows you to focus on your core products and services.

In other words, embedded finance makes it easier for companies to enhance their customer value proposition, and to scale without getting bogged down in regulatory hurdles.

Let’s take a closer look at how embedded finance can facilitate your company’s efforts at ensuring compliance.

1. Streamlined onboarding and KYC checks

Embedded finance providers like ConnectPay handle all Know Your Customer (KYC) and other compliance-related matters. This includes rigorous identity verification and due diligence procedures during onboarding, as well as continuous monitoring to ensure that your customers are not in violation of regulatory standards and requirements.

By outsourcing these tasks to experts, you can rest assured that your customer base will never run afoul of legal regulations, and that you won’t have to deal with the unpleasant consequences that you might otherwise face.

2. AML and CTF monitoring

Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) procedures are of major concern in the financial industry for self-explanatory reasons. With this in view, embedded finance providers conduct real-time monitoring of all transactions for suspicious behaviour, and take proactive measures to prevent illicit activity.

For instance, they often implement risk-based strategies, Customer Due Diligence (CDD), automated alerts, suspicious activity reports (SARs), integrations with national and international watchlists, comprehensive audit trails, and more. 

This ensures that your financial solutions maintain the highest standards of compliance and integrity.

3. Reporting to authorities

Given how daunting most companies find regulatory reporting to be, many embedded finance providers have developed the capacity to handle compliance data on their clients’ behalf, and submit it to the proper authorities.

This is a huge boon to most any business, especially in light of the numerous considerations that such reporting is subject to. Here are some of the main ones:

  • Keeping track of new regulations, and knowing how to interpret them correctly.
  • Collecting and validating data to make sure there are no discrepancies.
  • Handling variable reporting frequencies and volumes, dependent on jurisdiction and other factors.
  • Maintaining strict adherence to report submission deadlines.
  • Staying up to date with technology, and implementing reporting software.
  • Undergoing report audits and validation procedures.
  • Dealing with different reporting practices if your business is global.

Focus on your business, let us handle the rest

In addition to eliminating the risk of reputational and financial damage should you fail to ensure compliance, embedded finance also saves you a great deal of valuable time and resources that can be better invested in growing your business.

All you need to do is choose which financial services you need, and your provider will embed them into your existing website, platform or ecosystem.

Unparalleled support and flexibility

Rather than merely being providers of technology, embedded finance companies seek to become valuable, long-term partners dedicated to their clients’ overall success.

For instance, our team at ConnectPay is available 24/7 to offer guidance and support on all banking-related matters. We understand that each business is unique, and our developer-friendly APIs are designed to be flexible, accommodating even the most complex business models.

Key takeaways

  • Regulatory compliance is a fundamental aspect of the financial industry.
  • While there are various approaches to managing it, embedded finance with built-in compliance modules provides the most comprehensive and efficient solution.
  • This way, companies can avoid the high costs and headaches associated with in-house compliance teams or third-party providers.
  • With embedded finance, you can integrate financial services seamlessly into your business operations while ensuring fully transaction compliance.
  • Embedded finance platforms like us, streamline onboarding, handle AML and CTF monitoring, and take care of regulatory reporting, allowing you to focus on what truly matters – growing your business and delivering exceptional value to your customers.

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