Regulatory Compliance in Finance

The world isn’t ready for what’s coming next in sustainability data. We’re quietly living through the creation of a financial infrastructure for sustainability—and it’s happening faster than most realize. Over 2,000 sustainability regulations have emerged globally in the past decade, with a 155% surge in ESG-related rules since 2018. This isn’t just about compliance—it’s a fundamental shift in how we define value, risk, and performance. What’s driving it? • EU: CSRD & ESRS will impact over 50,000 companies, embedding double materiality. • India: BRSR Core is mandatory for top 1,000 listed firms. • China: CSDS expands carbon reporting in high-impact sectors. • California: SB 253/261 reshape U.S. climate disclosures. • Australia: AASB S2 aligns with IFRS S2, effective in 2025. • Brazil: CVM 193 adopts IFRS-aligned sustainability standards. • And more: Japan, Canada, Singapore, Nigeria, Turkey—all aligning with global standads. We’ve entered a phase where climate, nature, and transition risks are becoming embedded in financial decision-making—from underwriting and M&A to risk pricing and insurance modeling. In the real estate sector, GRESB has made third-party verified performance data (GHG, energy, water, waste) a best practice. ESG metrics are now more embedded in due diligence for loans, equity, and new acquisitions. Yes, today’s data is often backward-looking. And yes, we still need science-based thresholds and stronger assurance. But this foundational work is what allows us to get there. Without reliable, standardized, machine-readable data, we can’t scale action, track progress, or hold anyone accountable. Just as GAAP and IFRS created trust in financial markets, IFRS S1/S2, CSRD, and the GHG Protocol are setting the stage for credible, comparable sustainability data. It will not be a “parallel system.” in the future. We are building the groundwork for full integration into the global financial system. This shift will transform: • How we price risk • How capital is allocated • How resilient companies are rewarded • How we define long-term value creation It’s messy. It’s political. It’s imperfect. But it’s also historic. If you’re in this space, you’re not just reporting data—you’re helping build a new operating system for business and capital markets. One that rewards transparency, resilience, and climate alignment. Let’s keep building—with more rigor, more ambition, and more impact.

The Financial Action Task Force (FATF) has released its Updated Recommendations (February 2025), reinforcing international standards on AML, CFT, and Combating the Financing of Proliferation (CFP). Key Highlights: ✅ Risk-Based Approach (RBA) Strengthened • Countries and financial institutions must continuously assess ML/TF risks. • Proliferation financing risks (linked to WMDs) must now be explicitly assessed and mitigated. • Greater emphasis on data-driven decision-making in risk management. ✅ Stronger Financial Crime Enforcement & Asset Recovery • Enhanced measures to identify, freeze, and confiscate illicit assets, even without conviction-based legal proceedings. • Countries must cooperate more effectively on cross-border investigations related to ML, terrorism, and sanctions evasion. • Expanded legal mandates for regulators to seize cryptocurrency-related assets used for illicit activities. ✅ Enhanced Corporate Transparency & Beneficial Ownership Regulations • Stricter disclosure requirements for companies and trusts to prevent anonymous ownership structures facilitating financial crime. • Introduction of centralized registries for beneficial ownership information, accessible by regulators and FIUs. • Bearer shares and nominee shareholder arrangements are further restricted due to their role in obfuscating ownership. ✅ New Standards for Virtual Assets & Emerging Technologies • FATF mandates stronger oversight on VASPs, aligning AML rules for crypto-assets with traditional financial institutions. • New tech-based compliance controls (including AI-driven monitoring) recommended to enhance financial crime detection. • Stricter regulations for cross-border virtual asset transactions to combat illicit financing and crypto-enabled ML. ✅ Expanded Measures Against Terrorist Financing & Sanctions Evasion • Countries must implement targeted financial sanctions to prevent terrorism and WMD proliferation financing. • NPOS are now required to assess their terrorist financing risks while ensuring legitimate operations are not disrupted. • Greater scrutiny on correspondent banking relationships to prevent facilitation of illicit transactions. ✅ Increased International Cooperation & Mutual Legal Assistance • FATF calls for faster cross-border financial intelligence sharing to prevent criminals from exploiting jurisdictional gaps. • Countries must align with UNSCRs on CTF and sanctions enforcement. Recommandations: 🔹 Implement advanced transaction monitoring using AI to detect suspicious financial activities more effectively. 🔹 Reinforce beneficial ownership compliance 🔹 Strengthen cross-border AML/CFT coordination by fostering partnerships between FIs, regulators, and law enforcement agencies. 🔹 Ensure robust oversight on virtual assets by applying FATF’s Travel Rule to cryptocurrency transactions and monitoring DeFi risks. #AML #FATF #FinancialCrime #Compliance #CryptoRegulation

🔍 FCA Fines Barclays £42 Million for Serious FCC & KYC Failures – A Wake-Up Call for the Industry What happened? Britain’s Financial Conduct Authority (FCA) has fined Barclays Bank £42 million for two major compliance failures tied to financial crime risk management. 💣 Issue 1: Stunt & Co – AML Failure • Barclays failed to detect and manage money laundering risks linked to Stunt & Co, a firm that received £46.8 million from a money laundering operation. • FCA found that Barclays did not conduct proper EDD or monitor transactions effectively. • This accounted for £39.3 million of the total fine. ❌ Issue 2: WealthTek – KYC Failure • Barclays opened a client money account for WealthTek without verifying whether the firm was authorised to hold client funds. • A simple KYC check would have shown that WealthTek was not FCA-permitted to hold such money. • £34 million from investors went into the account, leading to major investor losses. • Barclays has agreed to make a voluntary payment of £6.3 million to affected clients. 🚨 Key Findings by FCA • Lack of effective AML controls for high-risk clients. • Failure in basic KYC due diligence before onboarding. • Inadequate internal processes to assess regulatory permissions of clients. 🛡️ How It Could Have Been Avoided 1. Stronger KYC Checks: Validating regulatory status before onboarding, especially for client money accounts. 2. Enhanced Due Diligence (EDD): Applying proper scrutiny to high-risk clients like Stunt & Co. 3. Ongoing Monitoring: Tracking transactions and behavioural patterns to spot red flags early. 4. Internal Governance: Setting up escalation and approval mechanisms for high-risk clients. 5. FCA Permission Check: A basic review of public register would’ve prevented the WealthTek error. Let this be a lesson for every compliance warrior – KYC is not a checkbox, it’s a shield 🔥 As Mahadev would say – “Negligence in duty is the seed of disaster.” Ready for your next compliance battle? Load your AML bazooka. 🎯

Reimagining Compliance, Trust and TPRM: Could Blockchain End Our Reliance on PDFs, Screenshots and Questionnaires? ⛓️ Why not use proof instead of trust. And what if instead of trusting auditors, we also trust math? 🔢 Who trusts Attestations and Certifications? 📋 SOC 2 provides trust. You also require trust. You trust that: - The vendor implemented what they claimed (lol, sure) - The auditor properly validated those claims (with screenshots, of course) - Controls haven't degraded since assessment (infrastructure never changes) - Documentation reflects reality (boilerplate policies FTW) But in security, trust isn't a strategy - verification is. Blockchain Security Validation: Trust the Proof ⛓️ Imagine replacing subjective assessment with cryptographic verification: - Configuration states are validated and cryptographically signed - Results immutably recorded on blockchain, evidence are now tamper-proofed - Smart contracts can validate controls automatically against predefined criteria - You can check historical record showing continuous compliance, - Easy real-time alerting when controls drift from attested state Rather than an auditor telling you that "encryption is used," the system would cryptographically verify that "TLS 1.3 is correctly implemented on all endpoints with no deprecated ciphers." Documentation Theatre to Verifiable Security 🎭 This transforms security attestation from paperwork exercise to mathematical proof: - Customers verify cryptographic evidence instead of reading through lengthy massaged control language - Vendors can prove continuous compliance, not just during audit cycles - Configuration drift triggers immediate alerts, not annual findings - Technical teams focus on implementation, not documentation - Customers can check control effectiveness without seeing sensitive implementation details, preserving vendor confidentiality The blockchain creates a permanent, verifiable history addressing both trust issues and point-in-time limitations of current attestations. Why This Matters 🎯 By bridging the documentation-reality gap with cryptographic proof, we eliminate the need for sample-based shallow testing. Imagine never having to answer "Do you have MFA?" again because customers can verify your MFA implementation themselves. The Path Forward 🚀 This isn't woo-woo - the building blocks exist today. We have: - Secure enclave technologies for sensitive validation - Smart contract platforms for attestation logic - API-driven cloud environments ready for integration - Zero-knowledge proofs for private verification What's missing is standardisation and ecosystem adoption. The first vendor to implement this model won't just streamline compliance/audit - they'll fundamentally change TPRM/customer trust dynamics. PS: This wouldn't work for all controls, lots of legal liability to work through, etc. #GRCEngineering

A viral image of an ATM in Ludhiana recently caught my attention - a dangerously steep ramp ending abruptly at a glass door, with a staircase running alongside that leads nowhere. A perfect reminder of a hard-earned lesson in fintech: "Compliance isn’t just a checkbox." Product Managers: You don't want to miss saving 💾 this post for your future reference. This ramp was technically "compliant" - yes, there was a wheelchair access ramp. But it completely missed the purpose of accessibility. People had angry comments on social media about the apathy with which wheelchair-bound customers were treated and how the bank had made a mockery of accessibility. No amount of regulation can account for 'compliance as a checkbox' implementations that are designed to meet the regulation but not serve their intended purpose. It's the same trap I've seen countless fintech products fall into - implementing regulations as mere checkboxes rather than embracing them as design principles. I've experienced regulatory hurdles umpteen times in product launches; in fact, I've never experienced a straightforward implementation that hasn't hit a regulatory roadblock. BUT I can say this confidently: Compliance-first design is the secret sauce that makes the battle easier and less arduous, and inarguably 'faster' IF You just stick to the first principles of building this into your product strategy from day one . Regulations can either slow you down or become your competitive edge. To make compliance your strategic advantage, here's my 3-step playbook: 1/ Design Integration: Make regulatory adherence a natural part of the user experience rather than an afterthought ↳Embed compliance requirements into your initial product design ↳Get feedback from legal and compliance teams, and even the regulator if needed ↳Validate, Test, Iterate, Repeat 2/ Cross-Functional Collaboration: Build bridges between product, legal/compliance teams from day one ↳Involve them early ↳Make compliance & legal stakeholders brainstorm and provide feedback ↳Balance innovation with regulatory requirements using case studies and data to back up assertions instead of getting into crosshairs with them 3/ Validate Early, Validate Often: ↳Test with real scenarios ↳Get early feedback from regulators ↳Regular compliance assessments, no matter what stage of development you are in One golden tip - document everything, err on the side of caution when it comes to building and fostering trust with legal and compliance counterparts. The lesson in one line? Build WITH compliance, not around it. Instead of working around regulations, let's build with them. Because when you design within the right guardrails, innovation doesn't just survive—it scales. What's your strategy for managing fintech compliance? Share below. 👍 LIKE this post, 🔄 REPOST this to your network and follow me, Monica Jasuja

Regulatory landscape against greenwashing 🌎 Regulations to prevent greenwashing are becoming increasingly stringent as governments and regulatory bodies worldwide seek to ensure that environmental claims are accurate, transparent, and verifiable. Historically, misleading green claims were regulated under general consumer protection laws, but the growing prevalence of sustainability-related marketing has led to more specific guidelines. Authorities such as the UK’s Competition and Markets Authority (CMA) and the European Commission have introduced new frameworks, including the Green Claims Code and the Green Claims Directive (GCD), to provide stricter oversight and enforcement. These initiatives aim to prevent businesses from using vague or deceptive sustainability claims to mislead consumers. Regulatory enforcement has intensified, with an increasing number of lawsuits and penalties for companies found guilty of greenwashing. In recent years, consumer protection agencies and advertising regulators in the US, UK, and EU have taken legal action against major brands that have misrepresented their environmental impact. Beyond government interventions, watchdog organizations and class-action lawsuits are holding companies accountable, resulting in substantial financial and reputational consequences. One of the key areas of regulatory focus is third-party certifications, which many companies use to validate their environmental credentials. However, the credibility of certification schemes varies widely, and some have been criticized for lacking independent verification or rigorous standards. To address this, the GCD explicitly bans self-certified sustainability labels and mandates that all new certifications undergo prior approval before being used in the EU. Only those that demonstrate meaningful environmental impact and transparency will be permitted, reducing the risk of misleading claims disguised under weak or unregulated certifications. Another significant shift in greenwashing regulations is the requirement for companies to consider the entire lifecycle of their products when making sustainability claims. As regulations become more stringent, companies will need to proactively adapt their sustainability strategies to remain compliant and credible. The shift towards greater transparency, stricter verification processes, and lifecycle-based assessments signals a new era of accountability in corporate sustainability. Businesses that fail to meet these evolving standards risk legal action, financial penalties, and consumer distrust, while those that embrace more rigorous sustainability reporting and certification processes will be better positioned to build trust and demonstrate genuine commitment to environmental responsibility. Source: Anthesis Group #sustainability #sustainable #business #esg #climatechange #greenwashing

🚀🌿 Exploring the FSB's new Nature-Related Financial Risk Stocktake The Financial Stability Board (FSB) just released a comprehensive stocktake on nature-related financial risks, providing valuable insights for the sustainable finance community. Here are some key points: 1. Diverse Stages of Evaluation: Financial authorities are at various stages of evaluating the relevance of biodiversity loss and other nature-related risks as financial risks. While some have recognized these as material financial risks, others are still monitoring international developments due to data gaps and the need to prioritize climate risks. 2. Data and Modelling Challenges: A major challenge identified is the difficulty in connecting underlying nature risks with financial exposures. There is a significant need for improved data and modelling to translate estimates of financial exposures into tangible measures of financial risk. 3. Regulatory and Supervisory Work: The regulatory and supervisory initiatives related to nature-related financial risks are in the early stages globally. There are diverse approaches across jurisdictions, with some authorities already implementing initiatives to promote firm-level disclosures and capacity-building efforts. 4. Analytical Frameworks: The report categorizes nature-related risks into physical and transition risks, similar to climate-related financial risks. Financial institutions are exposed to these risks through their investments and financing activities, but more work is needed to develop holistic approaches that consider the interdependencies between climate and nature-related financial risks. 5. Capacity Building and International Coordination: The report emphasizes the importance of international cooperation and capacity building to manage nature-related financial risks effectively. Examples include initiatives by the Network for Greening the Financial System (NGFS) and the Taskforce on Nature-related Financial Disclosures (TNFD). #SustainableFinance #NatureRisk #FinancialStability #FSB #Biodiversity #ESG #NatureDisclosure

Remittance firm Wise hit with $4.2m fine, UK's Monzo Bank pays £21m penalty, both stemming from money laundering control failures: This week has seen multiple AML-related fines against high-profile fintech firms. Wise's US subsidiary reached a consent order with state regulators in California, Minnesota, Nebraska, New York, Texas, and Massachusetts stemming from BSA and AML/CFT failures. The action followed a multi-state exam of the international payments firm, which serves consumer and business customers, that took place in early 2024 examining the period from July 2022 to September 2023. The exam found: -Wise failed to provide for an independent review of its AML program on a frequency commensurate with services provided; -deficiencies in Wise’s processes for investigating and reporting suspicious activity, including the failure to timely file suspicious activity reports; -transaction monitoring data integrity issues; -failure to timely correct past deficiencies detected in prior examinations and independent audits; -and violations related to the Consumer Financial Protection Bureau’s Remittance Transfer Rule. The consent order Wise reached with the states requires Wise to remediate the identified issues and to pay a $4.2 million penalty. Meanwhile, digital-only bank Monzo also paid a price for AML missteps last week, agreeing to a £21m with the UK Financial Conduct Authority. The fine could have been as much as £30.1m, but Monzo qualified for a "stage 1 discount," which reduced the penalty by 30%. The FCA's 44-page final notice provides significant insight into what went wrong at Monzo -- at a far greater level of detail than comparable actions by US regulators. Monzo's AML control issues stemmed in part from: -Rapid growth. Monzo saw its number of customers increase by 1,154% from Feb 2018 to March 2023 and its deposits grow by a whopping 8,315% in the same time frame. -Expanded product line. Monzo began as a prepaid card and expanded to offering current accounts (checking accounts) to both consumers and businesses, as well as launching overdraft, lending, and payments products. The reported noted that "rapid customer growth must not come at the detriment of compliance with the requirement to maintain adequate systems and controls to counter the risk that the firm might be used to further financial crime." Examples of gaps in Monzo's controls included: -Not doing any address verification at various points in time, allowing customers outside of the UK to open Monzo accounts, sometimes using obviously fake addresses like "Buckingham Palace" or "10 Downing Street" (Prime minister's residence) -Failing to obtain info about the purpose and nature of proposed customer relationships -Failing to verify the identity of all beneficial owners persons of significant control for business accounts -Lacking clear documentation on when customer enhanced due diligence is necessary, and how to undertake and document such diligence

Major #SFDR Overhaul: EU sustainable finance rules completely restructured The European Commission just proposed a fundamental redesign of the Sustainable Finance Disclosure Regulation (SFDR). Here's what's changing: THE TRANSFORMATION FROM: Complex disclosure-heavy framework TO: Streamlined 3-category product system Impact: 25-50% cost reduction for financial firms NEW PRODUCT CATEGORIES Article 9 - Sustainable: Already sustainable investments | 70% threshold | Strictest exclusions (no fossils, high-carbon) Article 7 - Transition: Companies transitioning to sustainability | 70% threshold | Moderate exclusions plus fossil expansion limits Article 8 - ESG Basics: Broader ESG integration | 70% threshold | Light exclusions (weapons/tobacco/violations) BEFORE vs AFTER: KEY CHANGES Scope Before: Financial market participants + advisers After: Only product manufacturers/managers Entity Disclosures Before: Principal adverse impacts + remuneration policies required After: Completely eliminated (€56M annual savings) Product Framework Before: Articles 8 & 9 as vague quasi-labels After: Clear categories with specific criteria "Sustainable Investment" Before: Complex definition causing confusion After: Definition deleted; embedded in category criteria Disclosure Length Before: Lengthy templates, no limits After: Maximum 2 pages pre-contractual Marketing Rules Before: Must not contradict disclosures After: ONLY categorised products can use sustainability terms in names MAJOR DELETIONS ⇢Entity-level principal adverse impact disclosures ⇢Remuneration policy requirements ⇢"Sustainable investment" definition ⇢Entire Delegated Regulation 2022/1288 repealed NEW ANTI-GREENWASHING MEASURES ⇢Only categorised products can use ESG terms in names ⇢"Impact" term reserved for specific strategies ⇢Member States prohibited from adding requirements KEY ADDITIONS ⇢Fast-track: 15%+ EU Taxonomy-aligned = automatic qualification ⇢Formal data & estimates documentation requirements ⇢Clear fund-of-funds framework TIMELINE ⇢General application: 18 months after entry into force ⇢Insurance/pension products: 30 months (12-month grace period) WHAT DOES THIS MEAN ⇢For Asset Managers: Lower compliance costs, clearer rules, predictable supervision ⇢For Investors: Better comparability, reduced greenwashing, easier product matching ⇢For Markets: Efficient capital allocation, stronger single market, competitive advantage The EU is choosing clarity and enforceability over comprehensive complexity. This fundamental restructuring bets that simpler rules with stronger enforcement better serve both market integrity and the sustainable transition. #sustainablefinance #sfdr #esg #regulation #assetmanagement #greenfinance #compliance #europeanunion