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Post: Why Outsource Your Compliance Function to a External Service Provider

Why Outsource Your Compliance Function to a External Service Provider

The Monetary Authority of Singapore (MAS) sets strict laws on Financial Institutions (FIs) in Singapore, requiring them to engage in regulated activities such as investing and providing financial advice. These laws ensure that suitable risk management strategies and procedures will be implemented to protect investors. This has developed a sustainable finance sector and transformed Singapore into a worldwide financial center.
Some of these stipulations and restrictions are declarations made through filings designed to ensure that FIs are in accordance with current laws and regulations. Since this regulatory environment is always evolving, it is essential that FIs’ continuing Anti Money Laundering (AML)/ Countering the Financing of Terrorism (CFT) & Client Due Diligence (CDD) efforts accurately reflect the current environment.

Consequently, FIs are searching for new ways to handle business-specific compliance challenges, such as via enhanced automation, higher efficiency, streamlined procedures, and more transparency. Governmental penalties and risks to credibility, development, and viability for both FIs and the business will likely emerge from a lack of compliance with regulatory regulations. The most damaging effect would be permanent damage to the basis of trust established with shareholders.
The MAS has determined severe punishments for anyone who does not comply with the AML/CFT regulations. An investor was penalized for $200,000 because they did not disclose their investment interests when required. In another instance, a FI was fined $400,000 for failing to exert adequate supervision in maintaining effective AML/CFT controls. As a result, this institution was put at high risk for engaging in AML/CFT activities, which led to the imposition of the penalty.

As a consequence, an increasing number of FIs are beginning to see the significance of building a risk-aware culture that has a responsive first and second line of defense for them to continue expanding their reputation as an integral element of a major financial center. Many FIs have to pay for high compliance expenses while simultaneously managing the need to maintain ongoing monitoring of the ever-changing compliance environment, which has led to a rise in total operating costs. Even if conformity might not be a function of the organization that directly contributes to revenue generation, it is nevertheless an essential component in effectively controlling occupational risk and carrying out corporate plans. Costs can be lowered directly from enhanced efficiency brought about by a robust compliance setup and monitoring program.

Consider contracting out your company’s compliance function for various reasons, including the ever-increasing volume and complexity of rules, the difficulty of finding qualified employees, and the ongoing push from shareholders to reduce operating expenses. These are just a few of the many possible reasons. The following are some of the ways that outsourcing compliance can assist you to concentrate on the core services of your business:

Ensures that all related regulations are being complied

In-house risk and compliance professionals in Singapore face a tough environment due to the country’s continuously changing regulatory framework. In addition to their other compliance-related tasks and obligations to their parent firms, they are required to keep themselves informed of these developments. Compliance companies can provide extensive and consistent lower-level analyses, analyze enormous data sets for potential alerts, and do other laborious activities. It’s helpful for FIs to understand that they have ready access to external compliance experts, if necessary. Additionally, they can be certain that their compliance service provider will continually make suggestions for enhancements and communicate best practices with FIs’ compliance department or function based on its extensive experience with a wide variety of customers and a keen understanding of what is ideal for each.

Helps save both money and time

Outsourcing compliance could be more cost-effective than engaging risk and regulation specialists for in-house usage. When compared to the expense of managing compliance internally, broker-dealers and advisers that outsource compliance activities have achieved significant cost savings of roughly 26%, as stated by Think Advisor. This also implies that outsourcing compliance can be performed for very reasonable prices because of economies of scale and a sharp emphasis on operations.
Furthermore, a fully staffed organization, as opposed to a few in-house personnel who may leave at any moment, will be responsible for your company’s compliance tasks, so you won’t have to worry about high turnover affecting the quality of your compliance program. By outsourcing compliance tasks, your company can focus on its core competencies while fulfilling the ever-changing compliance rules.

Compliance Resource and Human Resource Availability

When businesses choose to outsource compliance, they have access to compliance analytics technology without having to develop it themselves. This is particularly helpful for organizations in the middle of the size spectrum. The expenses associated with maintaining compliance infrastructure have grown as a direct result of the rising need for in-house compliance systems and skills. Because there is a competency gap and a skills gap in this industry, many different companies struggle to find qualified candidates to fill open positions on their internal compliance teams. By relieving the strain placed on an organization’s internal teams and allowing the compliance function to operate at a higher level of effectiveness, outsourcing compliance helps businesses construct a team equipped with all of the resources and expertise necessary to meet their compliance requirements.

Additionally, external service providers (ESPs) like Cambridge Advisers will ensure that the organization’s compliance is managed to a high standard. This is because they place a primary emphasis on preserving the necessary expertise as their primary offering. They often staff their organizations with formerly employed regulators, compliance officers, and developed their own pipeline of industry-aligned talents. Most significantly, compliance businesses can give the process frameworks and experience they have gained through delivering similar services to other customers. This helps to ensure that an organization’s compliance is managed properly.

In conclusion, a rising number of businesses are choosing to outsource their compliance operations to handle the complexity and number of regulatory obligations better. Even though it may be difficult for FIs to envision a successful partnership with an outsourced compliance provider in the beginning, they can be rest assured that their businesses will continue to meet all regulatory requirements if they choose a competent service provider to handle compliance independently. Cambridge Advisers is here to assist you in locating an appropriate compliance arrangement customized specifically to meet your organization’s requirements. We have a team of professionals here at Cambridge Advisers with a great deal of experience in compliance-related tasks and exposure to the field. Please do not hesitate to consult us at if you have any questions or concerns about outsourcing or any difficulties you may be experiencing with regulatory compliance.