Are your financial compliance reports truly auditable?

In the span of six months, European financial institutions were hit with 139 penalties. The total amount of these sanctions reached 1.23 billion dollars. Behind each of these penalties lies a regulatory breach.

As a financial institution, you are required to complete reporting tables intended for regulators. But to be compliant, providing figures is not enough. You must be able to demonstrate where they come from, how they were calculated, and why they are reliable.

In this article, you will discover why a lack of data piloting weakens your financial compliance reports, and how to ensure the auditability of your reporting.

Lack of traceability, the Achilles’ heel of financial compliance

Data is the key to regulatory compliance for your financial institution. Several regulations require you to provide data to regulators.

This is the case with the AML-CFT framework, which aims to combat money laundering and terrorist financing. It requires you to file suspicious activity reports and to provide customer and transaction data to the financial intelligence unit.

But compliance is not decided at the moment you fill in your reporting. It is decided at the moment you are asked to justify it. The BCBS 239 standard requires that your prudential reporting rests on traceable and auditable information. The RDARR guidance formalizes regulators’ expectations: being able to trace each data point back to its source, reconstruct the calculation, and demonstrate the reliability of the indicator.

The difficulty, then, is not building the report, but explaining how it is completed. As long as you cannot explain what happened between the original source and the final indicator, you are not in a position of compliance. You are in a position of fragility. Every data point must be auditable.

But too often, data is not properly piloted:

• the indicators exist, but no one knows how they are calculated,
• data moves between several applications, but it is impossible to retrace its exact journey,
• data transformations pile up without control or visibility,
• information passes through a “black box” that no one masters,
• the Data Office cannot keep every data point up to date manually,
• when an expert leaves the team, the explanation of the data leaves the company,
• anomalies are discovered at the end of the chain, when the report has already been produced,
• the compliance team cannot justify the content of its reports to regulators.

It is a genuine vicious circle. The absence of data piloting generates a lack of traceability. This lack of traceability produces erroneous reports that are impossible to explain. The result: your institution finds itself in a situation of non-compliance.

The heavy consequences of unpiloted data

The lack of auditability of your reports is the first direct consequence of unpiloted data. You complete reports, but you cannot establish a detailed timeline of how your data moved and which actions affected it. Your compliance team is unable to explain to regulators how the figures are actually produced.

This lack of traceability is an obstacle to verifying information. How can you determine the truthfulness of an indicator when you don’t know how it is calculated? Under these conditions, the reliability of your data and of your compliance reports can be called into question.

In the event of an audit, your financial institution is exposed to sanctions from regulators such as the ACPR. You may first receive an injunction to come into compliance. Then financial sanctions: up to 100 million euros in fines or 10% of annual revenue. Your organization is also exposed to a withdrawal of authorization.

A reputational impact adds to these sanctions. Institutions singled out by the ACPR are publicly listed in a register of sanctions. The result is a loss of trust from your customers and partners.

Financial companies invest heavily to avoid these sanctions. But the operational cost is high. The compliance team spends its time looking for evidence at the last minute. Without real coordination, IT and data teams intervene at the end of the chain, on the final point of data transformation.

This is not enough: bailing out water rather than sealing the leaks does not stop the boat from taking on water. Because the data chain evolves constantly: new flows, new transformations, new systems… At the slightest change, the evidence no longer exists and the compliance team starts over from scratch. In this scheme, employees suffer significant organizational fatigue.

Unsurprisingly, financial compliance is therefore an economic sinkhole. The cost of AML-CFT compliance alone amounts to 27 billion dollars in France.

There is, however, an effective way to make your data traceable and auditable… and to satisfy regulators.

How do you make your data auditable?

Good news: you already have the evidence you need to justify your compliance reports. You simply need to remove the black box that covers it.

Vokse is the data piloting solution that integrates into your existing environment to make your compliance reports auditable. The solution helps you move from a declarative approach to end-to-end traceability. This process unfolds in 7 steps:

1. Mapping: discover in which systems the data resides. Understand its journey by visualizing the map of the flows it passes through.
2. Reconstruction: follow the evolution of the data. For each transformation, visualize the rules and calculation methods applied.
3. Alignment: bring together the compliance, IT and data teams. Instantly switch between a business view understandable by the compliance team and a technical view usable by IT and data.
4. Remediation: correct anomalies at the source. Automatically translate technical fields (DN01, MAIL01, etc.) into business vocabulary.
5. Objectivation: prove the reliability of your regulatory data by relying on a confidence indicator, the data quality score.
6. Auditability: give “auditor” access to regulators, without exposing your sensitive data.
7. Scalability: keep traceability alive. Absorb changes in your systems and flows without starting over from scratch at every change.

These steps turn data lineage into a compliance lever. Every correction made is traceable: you can thus easily prove and explain to the regulator the controls you carry out.

Conclusion

Financial regulators do not only expect complete reports. They demand accurate figures, and the evidence that explains them. The absence of data piloting produces a black-box effect. This black-box effect produces indefensible figures. Indefensible figures generate a risk of non-compliance.

Vokse takes you from 0% to 85% of demonstrable traceability. Your teams can focus their efforts on the remaining 15%, to ensure your institution’s financial compliance. The solution is very easy to deploy and overlays your existing environment without disrupting it.

Request a demo with one of our experts to discover the solution.