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Designing for Compliance in the Financial Services Sector

By 3 minute read

The challenges of achieving compliance in the finance sector have been extensively discussed of late. With regulatory standards varying by geography and shifting year-to-year, compliance teams face a difficult task.

Their efforts to keep up with these ever-changing rules have created a substantial financial burden. Achieving anti-money laundering (AML) compliance, for example, is reportedly costing financial institutions in the UK an estimated £28.7 billion annually.

White paper: The real price of AML compliance

What’s more, with the large number of fintech firms now promising to deliver effective compliance software, it’s understandable if businesses are finding the compliance struggle a little overwhelming. For instance, vendors may offer all-in-one solutions, modular approaches, or industry-specific tools.

However, if organizations reform their compliance processes, setting up their systems to minimize manual human intervention, it is possible to fulfill regulatory requirements and boost efficiency. This approach is known as compliance by design.

1. A user-first approach

When designing products and systems for the finance industry, the most important aspects to consider are usability principles and the possibility of punitive measures stemming from non-compliance.

Usability principles are vital for guiding good design. In combination with usability testing, they fast-track the production of designs that truly address the needs of compliance managers. Good rules of thumb to follow include regularly informing users of the current system status, pursuing a minimalist design, and eliminating the conditions that are likely to lead to errors. By following clear usability principles, levels of user satisfaction are incommensurably higher than through the traditional gathering and listing of product requirements.

It’s also important to consider the high stakes involved. Earlier this year, for example, the poorly designed user interface of the financial software Flexcube ended up costing Citibank $500 million. Eliminating these kinds of costly mistakes should be among the highest priorities when formulating your risk management strategy and building an effective transaction monitoring solution.

2. Practice make perfect: engage end-users in validating your solutions

Maintaining a clear focus when designing your regtech software is key, this process is not one that should be rushed. It may take two or more iterations before you reach a version that you’re happy with. Once you’ve got a rough template for your compliance software, it’s time to test and measure your solution alongside compliance managers and risk analysts from different companies. It’s by learning how compliance teams work and interact with your software that you can offer a regtech product that truly fits their needs and goals. Be aware that this is not a process that should be rushed. It may take two or more iterations before you reach a version that you’re happy with.

3. Reduce complexity to strength capability

When designing for the financial compliance field, it’s also important to strike the right balance between providing all the necessary information and simplicity. Select the criteria that compliance managers need to monitor their scenarios and look to understand which ones need optimization. Facilitate decision-making while leaving the power and control in the hands of the compliance manager. Although your software may provide the data, the interpretation of this data and any subsequent conclusions should always be in the hands of compliance managers. Reports can be saved and used as supporting proof in the audit trail to justify changes made to the scenario.

White paper: The use of AI in AML Transaction Monitoring

4. Stay attuned to multiple tools and workspaces

To avoid the trap of an unsustainable fully customizable interface, invest in wisely tailoring the product to the needs of various financial institutions. Through extensive research, design choices should become obvious, but organizations must resist the urge to delegate product design to their customers. Instead, closely monitor the product to spot further improvements and introduce ideas gathered during user testing.

5. Encourage safety and compliance through cross-functional collaboration

To create a regtech software with outstanding security, efficiency, ease-of-use, and compliant to regulations, promote knowledge exchange between the different expertise teams. Throughout your product development cycle, facilitate the cooperation among market specialists, engineering, user experience design, data science, and cybersecurity. This joint effort ensures a pleasant experience to compliance managers and risk analysis teams while maintaining their data secure, and your software up to date to the latest regulatory requirements.

The way forward

Technology is a powerful tool for transforming cumbersome compliance controls into automated and effective workflows. Design research and techniques are key to ensuring usability and making complex steps appear simple.

At Sentinels, we use this approach to ensure product designs are tested by actual users before going into development. That way, we ensure user acceptance and de-risk your product development.

Ebook: How to set efficient AML Transaction Monitoring Rules