Do you understand the rules and repercussions of not following the rules?

Financial service firms are facing stronger scrutiny every year. Due to the number of firms remaining non-compliant, the regulatory bodies have felt no other option but to increase fines. Along with increasing fines, the regulatory bodies have also added stiffer penalties that could spell the end of a business. Do you understand the present repercussions for not following the rules?

Financial Services

Monetary Fines

In the beginning, this was the general fine that was levied. It became a problem when the fine was considered a minor annoyance instead of a reason to fix the compliance issues. With the number of financial institutions receiving fines, without actually fixing their issues, the actual fines themselves appeared to be moot. Fines actually reached into the billions, yet still did not compel institutions to comply. The regulatory bodies looked for other ways to compel business to comply.

Business Disruption

The regulatory bodies, understanding that fines were not fixing the problem, added another layer of reprimand by taking away businesses ability to continue regulated business either temporarily or permanently. Some of the businesses dealt with money that was connected to drug trafficking and money laundering. The companies received fines and then were barred from various arms of their business for a specified period of time. This leads to loss of profit over time. Additionally, businesses can be forced to abandon various arms of their practices or put a temporary hold on the hiring practices of the company.

Increased Capital Requirements and Share Price

Businesses that are found to be non-compliant and heavily fined will not look as good to investors and shareholders. Due to this, there could be an increase in capital requirements to ensure that businesses do not go under. Another factor is that as news of fines or possible misdeeds is made public, the share price will fall under speculation that further issues will arise or out of fear that the business will fail.

Senior Management Held Accountable

Going one step further in accountability, regulatory bodies are singling out senior management. These individuals are being held personally accountable. They can be required to give back bonuses already received or face a criminal conviction. When management needs to focus its attention on this, it takes away their ability to oversee the company successfully.

Looking Forward

Non-compliance is a serious issue with potential long-term repercussions. It’s important to take action to ensure that any fines do not get out of hand or negatively affect your company’s bottom line.

Do you have questions about compliance issues? Gain the peace of mind you need to stay focused on serving your clients. Contact our team of IT experts t or (309) 263-5600.

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