Modern Challenges Compliance Officers Face

Technological growth, as Ray Kurzweil, a futurist, inventor, and author, puts it, “…is exponential, and that makes a profound difference. If I take 30 steps literally, I get to 30. If I take 30 steps exponentially, I get to a billion.”

The core concept is that technology has advanced exponentially. These advances fuel economic growth, there is no doubt, and they take shape in the forms of new businesses along with innovative procedures and processes occurring inside of them. The reason this issue is being highlighted now, in the context of corporate compliance, is because technology provides tools to compliance systems making them more efficient and effective, bringing to companies automated risk detection and accuracy to operations. Conversely, the accelerating pace of change across developing technologies also represents threats to the businesses such as data breaches and money laundering.

On the one hand, information technology assists compliance with risk assessment processes by filtering data, performing general analysis, and making prioritization easier, but on the other hand, it is creating new opportunities like ransomware and for criminals to launder proceeds that come from illegal businesses.

Businesses’ data are actors’ target for whom the data has value: Personal, financial, health, intellectual property, and more. These actors can be cyber criminals who steal businesses’ data and demand ransom in large amounts in cryptocurrency as identities might be hidden behind the digital wallet address and it makes transactions hard to follow. Yet regulations and investigation processes worldwide are adapting and expanding alongside all of it.

Take a look at the trajectory of cryptocurrency and the ensuing call for rules and structure to govern its use, also tracking tools are becoming more powerful. Here you will find some of the new reporting requirements for cryptocurrency exchanges in the U.S. to take effect until Jan 1, 2023:

  • All cryptocurrency exchanges are considered brokers (like traditional brokers);
  • Cryptocurrency is formally defined as “digital assets”;
  • Digital assets are treated like securities, similar to stocks and bonds;
  • Cryptocurrency exchanges (like other brokers) must report information to both the IRS and to their customers;
  • If cryptocurrency exchanges fail to report the required information penalty is $250 per customer (maximum $3MM).

Furthermore, the criminal receiving the digital coin at some point will need to exchange cryptocurrency received from ransomware attacks and get back into traditional currency, where know-your-customer regulations are enforced, otherwise, the illegal proceeds are useless for many purposes. Hence it can be made traceable from an investigations perspective.

Meanwhile, Data privacy and protection laws and regulations around the world are being enforced, and here are some of their benefits:

  • Protect against leaks, loss, and theft;
  • Improve customer’s confidence;
  • Keep a business ahead of the competition;
  • Avoid fines and other legal issues.

All things considered, it is clear that compliance officers don’t operate inside of a static, unchanging environment. The regulations that provide oversight for a business one year may alter drastically from year to year or from month to month. As technology advances, so do the regulations—thus making the compliance officer’s position a challenging one.

Information Security, Data Protection & Common Sense

Compliance is not a passive position—it has never been. Changes happen faster now. The nature of exponential growth dictates that the speed at which they appear shall only increase. 

Data pertains to records, documents, and information your organization has collected on itself, competitors, employers, and even your customers. Even more concerning, especially from a compliance perspective, is how easily it can be transferred. Without strict oversight, this data can be intercepted and used by anyone from competitors to criminals. 

Where should compliance officers begin to focus their attention? Don’t just manage data to be compliant, do it because it is the right thing to do. 

The Heart Of Protection 

The absolute first step in staying compliant is to understand the rules and regulations connected to your industry—be it in information security or otherwise. As daunting and overwhelming as compliance can be, take comfort in knowing that you are not alone—even your compliance officer or whoever is in charge of compliance is not alone. 
To learn how to mitigate the risk of legal action, train and educate yourself and your employees, contact us for a consultation. Prae Venire offers customized training and implementation based on the needs of your business.