Is the Ease of Automated Regulatory Compliance Worth the Cost?

As the digital transformation brings the world closer together, many companies anticipate that both the complexity of regulations and the efforts by governments to enforce them will increase in the coming years. Companies that want to stay competitive and expand into global markets to find both employees and customers must navigate a complicated web of regulations while avoiding new pitfalls at home.

While larger organizations can lose millions to compliance missteps, the fines even smaller companies deal with can be equally damaging, and both may suffer economically from reputation loss related to compliance scandals. For some organizations, the answer has been to work with third parties that have the knowledge and background needed to navigate regulatory compliance in the modern world.

The “Expanding Payments Choice Playbook” explores the regulatory complexity of doing business in a digital world, the dangers for businesses that fall afoul of regulators and how partnerships can help.

Around the Expanding Payments Choice Space

The IRS is exploring new punitive measures in an effort to further discourage employers from using money withheld for employee payroll taxes as a lifeline for their businesses. While employers who fail to hand over tax withholdings in a timely manner already face fines and penalties, the IRS has now directed its agents to dig deeper and determine if the way the employer used these funds could be considered business income and eligible for taxation.

The early days of the pandemic saw financial institutions (FIs) directly involved in significant government disbursement efforts, and now Bank of America is facing more than $200 million in fines related to its handling of a state unemployment benefits program. According to investigators, BoA implemented a faulty fraud detection program that automatically froze the accounts of customers who had received pandemic unemployment benefits.

For more on these and other stories, visit the Playbook’s News and Trends section.

Nearside on the Complex Task of Compliance

There was a time when customers walked into an FI branch and handed an employee physical identification to open an account. In an increasingly digital world, banking customers may not even know the location of their FI, let alone ever visit it in person. Consumers are now opening accounts online, creating verification, regulatory and compliance issues for FIs offering online applications.

In this month’s Feature Story, Bert Friedman, vice president of compliance at Nearside, spoke with PYMNTS about managing compliance risk while verifying applicants in a timely manner, the impact of technology and the lag as regulations try to catch up.

Managing the Costs and Challenges of Regulatory Compliance

Some firms see paying regulatory fines and penalties as an unavoidable cost of doing business. At the same time, those costs can hit companies’ bottom lines hard, in addition to the reputation risk companies face and the potential to lose customers. As firms seek to stay competitive, the challenge of compliance will only grow.

Some are responding by increasing compliance-related spending. Others are turning to third parties and private agencies to help them stay ahead of regulatory compliance on an international scale.

To learn more about the costs and challenges of regulatory compliance and how companies are bolstering their compliance capabilities, read the Playbook’s PYMNTS Intelligence.

About the Playbook

The “Expanding Payments Choice Playbook,” a collaboration with Onbe, examines the growing costs and complexity of regulatory compliance.