What is compliance in the financial sector?

In the financial sector, it is important to operate transparently and according to the rules. Laws and regulations ensure that companies combat financial crime, mitigate risks and maintain their good reputation. Do you have a financial role within an organisation? Then you will have to deal with compliance regardless.  
But what exactly does compliance mean? How do you ensure that it is not just an obligation, but actually contributes to a strong and safe organisation? And what role does the compliance officer play in this? You can read more about it in this blog.

What is compliance in the financial sector?

Compliance comes from the English verb ‘to comply’ and can be translated as ‘to conform to’ or ‘meet’. In the the context of finance means this that companies must comply with laws, regulations and ethical standards. Therefore, organisations must put processes and controls in place to comply with legislation such as the Anti-Money Laundering (AML)-legislation and the General Data Protection Regulation (AVG). Its purpose is to inside information, money laundering, fraud and terrorist financing prevent. 
Compliance officer Ul
Compliance officer Ulaş

Why is compliance important?

The financial sector works with large cash flows and sensitive customer data. That is why strict rules have been put in place. A mistake or omission can not only harm an organisation, but also affect consumers and the economy. We give some reasons why compliance is important in the financial world:
 

1. Protect against financial crime: By complying with laws and regulations, organisations can recognise fraud, money laundering and other illegal activities in time and protect themselves and affected stakeholders.
2. Preventing problems: Regulators such as the Financial Markets Authority (AFM), the Nederlansche Bank (DNB) and the Personal Data Authority (AP) strictly monitor compliance. Organisations that fail to comply with the law risk fines, legal sanctions or the loss of certain licences. By taking compliance seriously, organisations can avoid these risks.
3. Building reputation and trust: An organisation's success depends on the trust of their customers, partners and employees. By following compliance rules, companies show that they operate transparently and safely.

What does a compliance officer do?

As an organisation, you don't get to choose whether or not you comply with compliance laws and regulations. It is mandatory. It is therefore important that organisations are well aware of laws and regulations that apply within their sector. You can therefore appoint a compliance officer within your organisation. This professional monitors compliance with external laws and regulations and internally established guidelines. A compliance officer has various tasks:
 

• Identifying and managing risks: Analysing compliance risks and devising strategies to mitigate them.
• Creating and applying policies: Develop and implement internal guidelines in line with applicable legislation. 
• Staff training: Informing and training employees so that they are aware of and comply with the latest compliance rules.
• Monitoring and reporting: Doing audits to check on everyone in the organisation's compliance and reporting on this to the management team and supervisors. 

The compliance officer thus plays an important role in ensuring transparency and integrity within the organisation, helping to prevent fines, legal santies and reputational damage.

What are compliance issues?

Compliance issues arise when an organisation does not fully comply with laws and regulations. This is also known as non-compliance and can lead to legal, financial and reputational risks. This can be intentional, but often occurs unintentionally due to lack of clarity, time pressure or a lack of internal controls. 
A common cause is too quick or careless compliance with rules. Companies want to stay efficient and sometimes apply legislation too hastily, leading to lack of compliance. Examples include missing documentation, insufficient monitoring of transactions or failure to update internal processes on time. 
In the financial sector, where transparency and risk management are of great importance, compliance issues can have major consequences. Examples include insufficient customer screening, failure to correctly report suspicious transactions or failure to comply with new legislation on time. This can lead to financial losses, but also damage the trust of customers and regulators. 
It is therefore important that companies do not see compliance as an administrative burden, but as an integral part of their operations. With clear processes, automation and continuous monitoring, organisations can prevent compliance issues and mitigate risks.

Why is compliance important to SimpledCard?

Finance teams need to be confident that expenses are properly managed and compliant with applicable laws and regulations. We offer smart payment solutions that allow finance teams to manage expenses efficiently.  
This is how we help your organisation with compliance: 

• Always insight into expenses: Real-time transaction data give instant overview and control. 
• Clear budgeting: Set limits and easily determine which employee can spend what.  
• Better governance: Control how expenditure is monitored and approved. 
• Easy integration: Link your accounting software for seamless administration. 

With our cash management solution finance teams can more easily work compliant, mitigate risks and at the same time be more efficient with their spending. A good cash management process plays a crucial role in this. Want to know more about this? Then read our blog oncash management. 

FAQ

Compliance means ‘comply with’ or ‘conform to’ and refers to adherence to laws, regulations and ethical standards. In the financial sector, this means that organisations must put processes and controls in place to comply with legislation such as AML laws and AVG, with the aim of preventing insider trading, money laundering, fraud and terrorist financing.

Compliance is crucial because the financial sector works with large cash flows and sensitive customer data. It protects against financial crime, prevents problems with regulators (such as fines and penalties), and helps build reputation and trust with customers and partners.

In the Netherlands, several bodies monitor compliance, including the Financial Markets Authority (AFM), De Nederlandsche Bank (DNB) and the Personal Data Authority (AP).

A compliance officer oversees compliance with external laws and internal guidelines. Duties include identifying and managing risks, drafting and applying policies, training employees, and monitoring and reporting on compliance to the executive team and supervisors

Compliance issues arise when an organisation does not fully comply with laws and regulations (non-compliance). This can be intentional, but often occurs unintentionally due to lack of clarity, time pressure or lack of internal controls. Examples include insufficient customer screening, failure to report suspicious transactions correctly or failure to comply with new legislation on time.