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Financial Compliance Solutions for Community Banks: The Case for Outsourced Expertise

This article was updated on July 13, 2021

Compliance remains a challenge for community banks. Many organizations are concerned about regulatory changes as requirements continue to evolve. These include both changes to existing expectations and emerging legislation that may impact day-to-day operations. The result? Community banks are now exploring the benefits of third-party financial compliance solutions. Here's a look at how outsourced cloud communications expertise can help meet emerging regulatory challenges.

Cloud-based financial compliance solutions can help ensure community banks keep up and keep their information secure.

Pushing the Envelope

Why are regulators so keen on ramping up expectations in the banking sector? Pushback against recent financial issues forms the basis for evolving rules — both federal and private agency regulators recognize the essential role of oversight as a critical front line against relapse.

As noted by the recent Deloitte report, Embracing Complexity: 2018 Trends in Banking Regulations, while the vast majority of the post-crisis reform blueprint has now been built, including the most impactful components, there's a concurrent realization that banks are at varying stages of maturity in their journey to transformation under the enhanced standards and broader governance, risk, and compliance expectations. The result is a shift from simply building compliance frameworks to sustaining compliance best practices.

Banks are also pushing for improved standards, especially as related to data security. According to Compliance Week, financial institutions now want nationwide breach standards: Jason Kratovil, vice president of Government Affairs at Financial Services Roundtable, argues that Congress needs to act to require firms of all shapes and sizes that handle sensitive information to protect the data, and it should do so by creating a robust, yet flexible and scalable, data security framework.

Simply adopting the cloud for financial communications isn't enough — banks must also ensure that their provider has the capacity and capability to meet compliance expectations.

Empowering Community Banks

It's one thing to recognize the need for compliance; it's another to effectively implement change, especially as community banks balance the need for financial compliance solutions against the cost and complexity of implementation.

In many cases, banks lack the necessary resources — both in time and personnel — to effectively roll out necessary compliance tactics and tools. So what's the solution? As reported by Bank Investment Consultant, financial planning points to a potential fix: 65 percent of banks are now considering partnerships with independent advisory practices to help fill in the gaps.

What does this mean for regulatory compliance? That community banks don't have to do everything alone. Consider that one key aspect of emerging regulatory practices is the need to secure electronic communications and ensure they meet data handling and protection standards. From encryption to access permissions to adaptability in the face of new requirements, handling everything in-house can quickly overwhelm smaller banks. Leveraging cloud-based communication solutions, however, can provide the necessary bridge between evolving expectations and current capabilities.

The cloud offers scalable storage for financial data that requires long-term retention while also empowering community banks to quickly access and transfer this information as required. With data handling shifted off-site, banks are able to focus on immediate concerns such as improving the active security knowledge of staff and reducing the overall risk of data compromise.

The caveat? While many clouds offer security solutions capable of meeting regulatory expectations, security by design is the key connection between expectation and outcome: Banks need to know where they are at risk and implement communication controls that address these concerns.

Meeting Certifications with Financial Compliance Solutions

While cloud communications solutions help streamline the transfer of financial information, compliance isn't a given — community banks are responsible for ensuring that cloud technology partners meet (or exceed) current standards.

Consider the Sarbanes–Oxley Act of 2002, also called SOX, which includes reforms to reduce the chance of fraudulent accounting activities. As noted by Investopedia, Sections 302 and 404 are of particular interest: 302 requires senior management to certify the accuracy of financial statements, while 404 mandates the creation of internal controls and reporting methods to ensure financial data is accurately reported.

As TechTarget expains, the Federal Information Security Management Act (FISMA) requires banks to effectively secure any government-related data by categorizing protected information using risk assessment tools to design effective security controls; they must also continuously monitor these tools. FCC, CPNI, PIC, and PCI DSS requirements also demand financial compliance solutions from community banks that meet data-handling expectations without compromising day-to-day performance.

Here's the takeaway: Simply adopting the cloud for financial communications isn't enough — banks must also ensure that their provider has the capacity and capability to meet compliance expectations. This may take the form of compliance certifications for common regulatory frameworks or auditable assurances that data transfer is handled in compliance with FISMA expectations, along with secure data transfer practices that empower collaboration without exposing information to undue risk.

2018 is a year of change for financial compliance expectations; while critical frameworks now exist, regulatory bodies are entering a period of rapid iteration even as front-line expectations increase and community banks look for ways to sustain solid best practices. Cloud communications offer a way to enhance collaboration, and achieve data-handling compliance, which meets current requirements and establishes the groundwork for future success.


Vonage Staff

Written by Vonage staff


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