Compliance Predictions for 2023
As last year’s geopolitical shocks showed, forecasts can quickly change due to unforeseen events. However, some clear industry trends for 2023 are emerging, and we can start to make some confident predictions about the likely challenges and opportunities for compliance departments in the year ahead.
Cryptocurrency
As cryptocurrency becomes more widely used and embedded in the financial system, risks have emerged that require more robust regulation to help protect investors. Expect regulatory bodies to act quickly and decisively. New legislation is imminent and the regulatory landscape should look very different this year.
ESG
Just like cryptocurrency, environmental, social, and governance (ESG) investing has also grown in popularity, and regulatory changes are likely. ESG reporting is becoming more complicated with a revamping of the rules for disclosure standards, comparable metrics, and reporting requirements. These changes are primarily being driven by a concerted bid to prevent so-called “greenwashing”, which is when companies make misleading claims about ethics and sustainability. Tighter rules and increased scrutiny should see compliance departments taking a more prominent and active role in this area.
Self-regulation
In the UK, new money-laundering legislation is leading to more self-regulation to address the threat of illegal financial activities. Working groups are springing up that enable businesses to share best practice and pool knowledge on compliance issues.
Global supply chains
Global supply chains are set to face increased scrutiny after the introduction of The European Supply Chain Act. Designed to improve sustainability along the entire supply chain, this legislation will have a cascading effect on businesses all over the world.
Impending recession
The global economic outlook is gloomy. Downturns usually see a spike in financial crime because of increased levels of hardship, and compliance teams need to be prepared. This challenge might be compounded by budget cuts as businesses look to reduce costs, leaving the compliance department short of the resources they need to tackle the likely surge in criminal activity.
Artificial intelligence
ChatGPT gave many people their first experience of using an AI tool. The application of this technology has huge potential in many different sectors and should quickly become more prevalent in compliance where it can be used to monitor financial activities and transactions. Artificial intelligence is especially powerful because of its speed and capacity to learn. Although this technology is still in its infancy, it will quickly become more sophisticated, creating exciting new possibilities.
Data regulation
Data privacy laws are evolving rapidly and consumers are increasingly better informed about their rights. Compliance teams need to be aware of those rights and respect them, taking extreme care to safeguard personal information.
Investigation and enforcement
Last year saw a rise in enforcement actions and this trend looks set to continue. Expect more prosecutions for regulatory breaches along with bigger fines.
Compliance professionals need to keep pace with these trends and regulatory changes, updating their knowledge and skills accordingly. As compliance becomes more proactive, as well as a means to establish competitive advantage, companies will look to hire people with commercial acumen who understand this profound shift.