Top Regulatory Developments Impacting the Finance Industry (and How an EOR Can Help)

Arising regulatory changes continue to make an impact across industries, especially in the rapidly changing finance world. The increasing popularity of cryptocurrencies is influencing how the industry is handling compliance, while stricter requirements around activities impacting the environment are changing reporting practices. Data privacy also continues to be crucial, especially for international institutions working in different jurisdictions.  

In this blog post we are going to discuss how the finance industry is being impacted by these regulatory shifts, and demonstrate how an Employer of Record (EOR) partnership can help navigate them with more confidence while minimizing risk.

Sustainability Disclosure and Reporting

Environmental, Social, and Governance (ESG) reporting and climate risk disclosures are pushing for greater accountability and transparency in the financial services sector. Financial institutions are now obligated to include ESG elements into their investment and lending decisions, ensuring that climate risks and sustainability are considered alongside traditional financial concerns.

Because businesses now need to invest in data collection, reporting systems, and expertise to fulfill new ESG standards, this regulatory shift has resulted in higher compliance costs. Strong ESG credentials are becoming more and more valued by investors, which puts pressure on businesses to improve their sustainability procedures. Financial organizations that are required to disclose climate risk run the danger of damaging their reputation and facing legal repercussions if they do not adequately report or mitigate sustainability issues. Learn more about the focus on environmental stewardship in finance in our blog.  

Increased Data Protection Regulations

Data privacy laws are also having a significant impact on the finance industry, as they are making managing customer information more complex. Stricter regulations governing data management, storage, and cross-border transfers, like the General Data Protection Regulation (GDPR) in Europe, and other regional privacy frameworks are now mandatory for financial institutions to abide by. In order to prevent future breaches and fines, these requirements require increased investment in cybersecurity and data management infrastructure.

Additionally, financial organizations are having to adopt more stringent permission procedures and transparency measures as the reach of data privacy legislation expands to protect client trust. Restrictions on cross-border data transfer are also adding challenges for companies operating in the global financial sector as they must comply with legal requirements in different jurisdictions. Gain more insights and key considerations about expanding your workforce worldwide.

Changing Rules for Digital Assets

Increased scrutiny and regulation of digital assets and cryptocurrencies are impacting financial institutions as they’re requiring more structure and compliance. Traditional banks and financial organizations have been cautious to embrace digital assets due to regulatory uncertainty, weighing the risks associated with innovation against maintaining compliance.

Now financial institutions are complying with more stringent regulations pertaining to know-your-customer (KYC) procedures, taxation associated with cryptocurrency activities, and anti-money laundering (AML). To safeguard investors and lessen market manipulation, these regulations are also forcing cryptocurrency exchanges and platforms to implement more robust security and transparency measures. These changes will ultimately pave the way for greater institutional acceptance of digital assets while ensuring consumer protection and financial stability.

Although these shifts can be complex and challenging to keep up with, establishing the right partnerships can help financial organizations get ahead and maintain compliance while minimizing risk.

Partnering with an EOR

Establishing a partnership with a leading EOR can help finance institutions stay on top of the latest regulatory changes. An EOR provides legal expertise on an ongoing basis on current laws and upcoming shifts, which is especially critical for multinational organizations that operate in different places around the globe. This includes education, support, validation, process standardization, and more. EORs also take responsibility for payroll, HR-related activities, and taxes. Because EORs take on legal responsibility of abiding with compliance rules and limiting co-employment risk, the financial organization is more protected from fines or even potential lawsuits.   

Besides improving risk mitigation and compliance, partnering with an EOR presents other advantages. An EOR can help financial institutions create an excellent worker experience by affordably providing health benefits, pension plans, 401k options, and even on-demand pay. Creating a leading worker experience can help not only retain talent but attract new workers to the organization as well, helping to bolster employer brand. EORs can also help financial institutions reduce costs by avoiding agency markups on every engagement with a worker, especially when the EOR is vendor-neutral, which has the added benefit of getting the best talent at the most competitive rates.

For more valuable insights on the latest trends in workforce management and compliance, check out our ebook.