MINNEAPOLIS – A growing sense of empowerment gained by many financial services regulators in 2009 will likely transform into a broad array of new rules and agencies, as well as stepped-up enforcement actions in 2010, according to regulatory compliance experts at Wolters Kluwer Financial Services.
The financial services industry is already beginning to see evidence of change as Congress debates additional legislation surrounding regulatory reform and regulators conduct more stringent exams. Adding to this regulatory burden, experts say, will be a soft U.S. economy that will likely lead many institutions to take more steps to better protect themselves and consumers from risk.
“There is a race in Washington, D.C. right now,” said Edward Kramer, executive vice president of Regulatory Programs at Wolters Kluwer Financial Services. “It’s a race by legislators and regulators to see who can do more to protect the American consumer.”
Regulators are also getting tougher on fair lending violations according to Margaret Camp, director, Compliance Services, at Wolters Kluwer Financial Services, noting that regulators are looking more closely at automobile dealers, in addition to the lenders they work with.
“For the first time in recent years, it seems the Department of Justice is beginning to target dealer groups for fair lending violations,” Camp said. “Dealers, as well as lenders, need to make sure they are taking appropriate steps to prevent discriminatory lending in order to protect their consumers and their own business.”
Kevin Byrne, senior regulatory consultant at Wolters Kluwer Financial Services, says the struggling U.S. economy has also elevated fraud concerns because tough economic times can cause more employees at financial institutions to resort to fraud on top of the financial crimes already being committed against an institution by outsiders. “The stakes are high for institutions since an employee with inside knowledge of the firm’s workings can drain tens, if not hundreds, of thousands of dollars from legitimate customer accounts in a very short time,” Byrne said. “Many institutions are starting to realize that by investing in the people and technology up front to stop internal and external fraud losses before they occur, they can actually improve their bottom line in the long run.”Byrne said that as part of these efforts, some institutions are beginning to connect their anti-fraud and anti-money laundering investigation units. In doing so, he says both have access to more up-to-date customer information that they need to do their jobs more effectively.
“As U.S. Navy Admiral Hyman Rickover, known as the father of Nuclear Navy, said, ‘You don’t get what you expect; you get what you inspect,’” said Thetford. “I think that’s a motto many regulators and legislators are moving toward. They are paying closer attention, finding gaps in the regulatory system and taking steps to fill them.”
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