Navigating Compliance Challenges and the Modern Regulatory Landscape

The modern compliance landscape is a balancing act—one that demands not only adherence to evolving regulations but also proactive strategies to counter emerging threats. With globalisation and technological advancements deepening the interconnectedness of companies and economies, new vulnerabilities have emerged alongside increased regulatory scrutiny. As a result, compliance leaders now find themselves tasked with tackling regulatory challenges that are increasingly complex.

3 Challenges in the Modern Compliance Landscape

The challenges in today’s compliance environment are vast and multifaceted, but at the heart of these lie three key complexities.

1. Cross-Border Risks: A New Normal

In an era of globalisation, cross-border partnerships have become pivotal for business growth, but they also expose firms to heightened risks. One of the most pressing is inadvertent associations with sanctioned entities or individuals.

A recent Forrester Research report¹ underscores the growing challenge of identifying bad actors who increasingly exploit complex ownership structures to mask their identities and beneficial ownership. The issue is particularly pronounced in Asia Pacific (APAC), where the intricate trade and financial networks create opportunities for criminals to exploit trade channels and legitimise illicit funds.

This challenge is compounded by the fact that sanctions are not always straightforward. Individuals may be indirectly sanctioned through family ties or connections to other sanctioned entities, which often go undetected by conventional screening processes focused on formal sanction lists.

When cross-border transactions involve several parties, compliance teams face an added layer of complexity in identifying these hidden risks.

Takeaway: Given these considerations, having the ability to access and identify reliable data that enables more effective risk assessments becomes key.

2. Navigating Regulatory Nuances

As companies expand into new markets within APAC, the need to navigate fragmented regulatory frameworks across jurisdictions introduces another challenge. Compliance teams must not only balance local nuances with overarching corporate standards but also adapt to evolving laws and new Know-Your-Customer (KYC) technologies—tasks that demand agility.

Cultural and language differences, inconsistent training, and the absence of standardised compliance protocols further complicated these efforts. As a result, companies often face challenges like operational inefficiencies, longer client onboarding times, and increased workloads for compliance teams, all of which strain resources and hinder business operations.

3. Managing the Duality of Technology

Another challenge stems from the advancements in technology, which presents a double-edged sword.

i. Combating New, Sophisticated Threats

While they drive efficiency, innovation, and scalability, they also introduce sophisticated risks, such as AI-enabled fraud and cross-border money laundering. Figures from a Check Point Research² reflect these escalating threats organisations face, highlighting a 30% year-on-year (YoY) increase in cyberattacks worldwide. Notably, these same technologies add to the complexity of risk landscapes by making threats more pervasive, interconnected, and harder to pinpoint and manage.

Consider the rise of deepfake technology as a case in point. Deepfakes can potentially be used to bypass KYC checks, facilitating fraudulent activities that can have severe repercussions for enterprises, such as financial losses, erosion of public trust, and reputational damage.

ii. Upholding Data Privacy and Security

Meanwhile, digitalisation has exponentially increased the volume of data requiring protection. Concurrently, the widespread adoption of generative AI, IoT devices, and SaaS applications has significantly broadened the attack surface, increasing the difficulty of safeguarding sensitive information. IBM’s Cost of a Data Breach Report 2024 highlights the scale of this challenge, noting that 40% of breaches now involve data spread across multiple environments.

Takeaway: From a regulatory standpoint, robust data protection is crucial to ensure compliance with the increasingly stringent global data protection laws and avoid hefty legal penalties. Financially, doing so is vital to help companies avoid financial losses, which IBM estimates to be at an all-time high of US$4.88 million per breach in 2024—a 10% increase from 2023.

iii. Keeping Up with Evolving Regulatory Frameworks

In addition to introducing new threats, emerging technologies are driving the development of new regulatory frameworks that businesses must stay ahead of to remain compliant.

Takeaway: This dynamic environment demands proactive risk management, the implementation of comprehensive data governance, cybersecurity and compliance frameworks, as well as frequent reviews of existing strategies. Equally vital is the investment in skilled teams equipped to anticipate and mitigate risks so businesses can leverage technology to its full potential.

Turning Hurdles into Opportunities

These complexities of today’s risk landscape highlight how compliance has transformed from a mere regulatory necessity into a strategic imperative for businesses. While the challenges teams face continue to grow, forward-thinking leaders are leveraging compliance as a differentiator and reshaping the role of compliance within enterprises.

Through discussions with compliance and business leaders, our financial services recruitment consultants have identified effective entity and customer verification as a foundational priority. However, its success hinges on managing two key concerns.

1. Overcoming Data Quality Concerns

Effective verification mechanisms rely on accurate, reliable data. However, many businesses often struggle with synthesising diverse information sources into cohesive risk assessments. This stems from the difficulty of managing vast amounts of information from diverse sources, each varying in reliability and relevance, which is a laborious process, even for large enterprises. Meanwhile, the lack of time-stamped primary source data and limited audit trails further complicate the process for compliance teams.

2. Strengthening Data Governance

Notably, even when firms recognise their data quality challenges and the negative impacts, they may still struggle to address them due to barriers such as:

• Gaps in Collaboration and Integration: Outdated systems can limit access to quality information, making reconciling external vendor data with internal records tricky.
• High Costs: The cost of accessing different databases or systems can be prohibitive, especially for smaller businesses.

Unsurprisingly, data governance and quality assurance have emerged as one of the top three challenges companies face, as reported in a study by Moody’s³.

Is Overcoming Challenges of Data Governance Worth it?

Given that data governance systems are often perceived as cost centres rather than revenue drivers, securing leadership buy-in for the necessary investments can be difficult. That said, the cost of inaction far outweighs the investment needed for improvement.

• Productivity Loss: According to a study by Forrester, 63% of employees reported spending excessive time searching for the right information or contacts to help them access it. Across thousands of employees, this inefficiency translates into substantial productivity costs.
• Revenue Loss: A separate study from market research firm IDC⁴ corroborates this, reporting that the inefficiencies resulting from data siloes to cost businesses as much as 30% in revenue losses annually.
• Poor Decision-Making: Beyond operational inefficiencies, poor data governance also compromises decision-making. In the same study by Forrester, it was further revealed that 29% of respondents admitted to making flawed decisions based on incomplete information. This can eventually become a costly business problem when companies must invest extra time and resources to resolve issues or rebuild customer relationships.

As industries increasingly incorporate AI into workflows, data quality becomes even more critical. Whether companies use AI to clean data before compliance works or leverage cleaned data for more accurate analyses, the quality of the input data is critical. Without accurate input, the effectiveness of AI is compromised, preventing firms from maximising the tool’s full potential. Investing in data governance is, therefore, not just an operational necessity but a key to long-term resilience and competitiveness.

Strategising for the Evolving Compliance Landscape

As businesses look to mitigate data-related challenges, the following considerations can make for a more effective strategy:

• Centralised Data Management: Industry leaders are turning to centralised data repositories to unify disparate systems. This approach not only enhances compliance maturity but also reduces duplicative efforts, inefficiencies and costs of data discrepancies, ultimately enhancing organisational productivity and agility.
• Designated Leadership: A common stumbling block observed is not the absence of frameworks but a lack of adherence to them. Top-performing companies often overcome this by appointing data and compliance leaders across various levels of seniority to proactively review strategies and champion initiatives, ensuring protocols are consistently followed across the organisation. With designated senior executives, data governance and compliance can also be prioritised at the board level, enabling teams to gain the executive buy-in necessary to drive transformative changes.
• Cross-Functional Expertise: Leading firms are building cross-functional compliance teams and fostering cross-jurisdictional collaboration to equip teams to address multifaceted challenges.
• A People-Centred Approach: Successful compliance leaders understand that their role is not an isolated policing function but a partnership. That is why many strive to champion a culture of collaboration and demonstrate how compliance can support an organisation’s strategic goals. In doing so, they foster a stronger, more supportive culture that contributes to the strengthening of the organisation’s underlying ethical foundation.

For professionals: As the regulatory and risk landscape evolves, leaders will increasingly need to re-evaluate their compliance strategies and combine technical expertise with strategic vision to stay adaptable and deliver long-term value. When assessing new career opportunities, look into an organisation’s compliance culture critically. This involves examining its historical compliance record, including any past penalties, and how senior leadership champions compliance initiatives to stay aligned with the evolving regulatory landscape.

For employers: As the regulatory and risk environment evolves, organisations need compliance professionals with the skills and strategic vision to navigate complexity, and this is where our team at JC Consulting is equipped to help. Our financial services recruitment team includes former compliance professionals who bring a nuanced understanding of the role’s requirements. This, combined with our strong presence in APAC and executive search firms in Singapore and China, enables us to help you connect with the right talent capable of navigating this evolving landscape.

To learn more about how the compliance industry and workforce is evolving, connect with our consultants today.

Key References:

¹https://www.scmp.com/business/banking-finance/article/3262527/asia-pacific-money-laundering-hotbed-bad-actors-exploit-shell-companies-cryptocurrency-while-ai

²https://www.darkreading.com/cyberattacks-data-breaches/check-point-research-reports-highest-increase-of-global-cyber-attacks-seen-in-last-two-years

³https://www.moodys.com/web/en/us/site-assets/ma-kyc-who-are-you-doing-business-with-ev-study.pdf

⁴https://www.jpmorgan.com/insights/securities-services/data-solutions/consistent-containerized-data