Key Takeaways

• Learn what a compliance checklist is.
• Learn how to create a compliance checklist for your company, with specific items to include in your checklist.

Compliance regulations might be viewed as a necessary evil for banks, RIAs, and fintechs. They require proactive management of compliance and compliance risk, extensive documentation, and the ability to adapt to constant regulatory changes.

That might sound like a burden, but the stakes are high for failing to take these steps for compliance. Recent reports highlight the consequences:

• The banking industry had to pay over a combined $3.2 billion for anti-money laundering penalties, according to ComplyAdvantage.
• Sixteen RIA firms were ordered to pay a combined $81 million in fines for failing to keep proper records, according to the SEC.
• And, according to Alloy, more than “60% of fintechs [have] paid at least $250K in compliance fines.” 

To remain compliant and organized, a compliance checklist is an indispensable tool, serving as a roadmap for your company to track its requirements and stay ahead of the evolving regulatory standards.

So, what is a compliance checklist? This article will explore what a compliance checklist is and assist your bank, RIA, or fintech with the key items to include when building your own tailored checklist.

What Is a Compliance Checklist?

A compliance checklist is a detailed list that simplifies an organization’s complex requirements for compliance regulations into manageable tasks. The purpose of the checklist is to help the company mitigate risks and ensure every part of its business is adhering to financial-related laws and regulations.

However, compliance checklists don’t just provide a framework for streamlining compliance reviews. These checklists also create additional documentation to supplement any reports and audits filed with regulatory authorities.

For banks, RIAs, and fintechs, a compliance checklist should include the important requirements needed to be compliant, including anti-money laundering laws, data security protocols, consumer protection standards, and more that will be explored below.

What Is Included in a Compliance Checklist? Key Items for Your Compliance Checklist

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The sector of the financial industry that your company operates in will determine exactly what items your compliance checklist will need to include.

For instance, a bank may need to focus its compliance checklist on its lending and deposit-making operations. On the other hand, an RIA may need to focus its checklist on requirements relating to investment portfolios and investing advice.

However, it is worth noting that a new ruling by the Financial Crimes Enforcement Network (FinCEN) will classify RIAs as financial institutions. This will make RIAs subject to Anti-Money Laundering (AML) compliance requirements on par with banks. And there has also been increased scrutiny on the lack of oversight for fintech companies and how fintechs need to improve their compliance procedures.

With that in mind, let’s look at the key items that banks, RIAs, and fintechs will want in their compliance checklist, starting with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.

1. Anti-Money Laundering and Know Your Customer Requirements

“The Currency and Foreign Transactions Reporting Act of 1970,” more widely known as “The Bank Secrecy Act,” implemented Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for financial institutions to prevent financial crimes, mainly money laundering and the funding of terrorism.

Banks and other financial companies–soon including RIAs–must have technology and procedures in place that verify their clients’ identities and monitor their transactions for suspicious activity. One requirement that is most commonly known is that banks must report deposits of $10,000 or more to regulators.

These requirements are critical and very specific, so your compliance checklist should include the following items:

[  ] Verify All Customer Identities

Your company must have a way to collect and verify client information, such as their name, address, date of birth, and their government-issued identification.

If you can’t check this item off of your list, then your organization is failing its due diligence and compliance, leaving itself vulnerable to regulatory fines and sanctions.

[  ] Monitor and Report Suspicious Transactions

As mentioned above, banks and other financial institutions must be able to flag and report transactions that could be considered suspicious. This includes bank deposits of $10,000 or more, but also includes any transactions that depart from the levels of normal activity.

[  ] Conduct Periodic Risk Assessments

Conduct compliance reviews and evaluation of your organization’s AML and KYC procedures and policies on a regular basis. This allows your team to assess risks and provides the opportunity to make adjustments to mitigate risks and for full compliance.

[  ] Train Staff on AML and KYC Policies

Along with technology to monitor and report any suspicious activity and non-compliance, another line of defense is your staff. However, they must be knowledgeable of the AML and KYC regulations and how their roles fit within your organization’s compliance framework.

2. Data Protection and Privacy Laws

Since “The Bank Secrecy Act” lays out requirements for verifying your customers’ identities and monitoring any suspicious financial transactions, that demands that your organization collect sensitive data about your customers. In addition, the other operational needs to conduct business and compete in the financial market also require your company to collect customer information. 

Doing so means your organization must be in compliance with the regulations governing the management and protection of customer data.

To adhere to data protection and privacy laws, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), add these items to your compliance checklist:

[  ] Ensure Encryption of Customer Data

Your company must have robust encryption in place for both at-rest and in-transit data.

[  ] Review Data Access Policies

Evaluate and ensure that only authorized personnel have access to customer data.

[  ] Be Transparent with Customers

Be transparent with your customer and explain how your organization collects, uses, and shares their data. State all of this in your company’s privacy policy.

[  ] Establish a Data Breach Notification Protocol

Be prepared; devise a plan for any potential data breach on your organization’s infrastructure. Ensure that you have a procedure for notifying your customers and authorities promptly, and a plan to contain the data breach as quickly as possible.

3. Consumer Protection Regulations

While your organization is committed to treating its customers fairly, there are still regulations in place that ensure that you do. These include the “Truth in Lending Act” (TILA) and laws relating to “Fair Lending,” which require that your organization treats consumers fairly and provides them with transparent and accurate information about your financial products and services.

To ensure compliance with these consumer protection laws, add these items to your checklist:

[  ] Provide Clear Disclosures

State all of the fees, terms, and conditions of your financial products and services in a conspicuous manner.

[  ] Implement Consumer Complaint Processes

Have a system that makes it easy for customers to file a complaint or dispute with your company. Also ensure that your system enables your team to address and resolve these customer issues quickly.

[  ] Ensure Accurate Marketing Materials

Compliance review all of your marketing content for adherence to regulations. Use an AI-powered system like Luthor to streamline this review process and ensure compliance with marketing regulations set forth by the SEC, FINRA, and others.

4. Regulatory Reporting and Documentation

Keep thorough records relating to your organization’s operations and compliance with regulations. Regulatory agencies will require you to submit reports to them on a regular basis, and having this documentation is vital.

Items to include on your compliance checklist for documentation are:

[  ] Submit Periodic Financial Statements

Submit financial reports to the appropriate regulatory authorities on time.

[  ] Maintain Secure Records

Secure and organize all of your records in a way that provides easy access for appropriate team members and to regulatory agencies. 

[  ] Conduct Internal Audits

Like with AML and KYC, conduct regular evaluations of your organization’s financial records and compliance. 

5. Fraud Prevention and Risk Management

Utilize technology that can detect and prevent fraud in real-time. Such a system can support your team and reduce their burdens by flagging suspicious activities that require further scrutiny.

Checklist items for your fraud prevention and risk management include:

[  ] Monitor Transactions for Fraud Indicators

Monitor your network to spot anomalies or behaviors that could indicate fraud.

[  ] Implement Fraud Detection Technologies

Use technology like artificial intelligence and machine learning to scale your organization’s fraud detection.

[  ] Conduct Periodic Risk Assessments

Review how vulnerable your organization is to fraud on a regular basis. This provides the opportunity to adapt strategies to evolving threats.

6. Employee Training and Awareness

Even when an employee isn’t a compliance officer or directly involved in the compliance department at your organization, they must be aware and trained in regulatory standards and their workplace’s policies for those regulations.

Add employee training and awareness to your checklist with these items:

[  ] Provide Regular Compliance Training

Conduct training sessions often enough to inform your team about regulatory changes and how your organization is adapting its compliance procedures to those changes.

[  ] Update Training Programs

Along with updated training sessions, ensure that any training materials have been revised to reflect new regulations and adapted compliance policies.

[  ] Maintain Training Records

To support #4 on this list, create detailed documentation about the completion of employee training. This will assist with auditing and when reporting to regulatory agencies.

Conclusion

What is the point of a compliance checklist? It simplifies the process of compliance and provides greater organization, while mitigating risks and maintaining adherence to evolving regulatory standards.

Utilize the power of Luthor to support your compliance checklist. Luthor makes creating, reviewing, and publishing marketing content 6x faster. The AI-powered platform can also continuously monitor your marketing content to maintain compliance with new and updated regulations. Book a demo with the Luthor team today to automate your marketing compliance.

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