Banks face a new wave of compliance complexity
While federal agencies signal a regulatory reprieve for financial institutions, states are advancing their own agendas to fill perceived gaps. This patchwork of rules creates complexity for banks operating across multiple jurisdictions.
In a recent webinar, State of scrutiny: How states are reshaping banking compliance in a shifting federal landscape, Wolters Kluwer gathered experts who unveiled insights on recent research into regulatory and enforcement trends across a range of states.
These conversations revealed the challenges banks face and the strategies they need to stay resilient.
"We know that priorities continue to shift," Jason Keller, Director of Market Strategy for Compliance Analytics, adds. "Financial institutions are in need of affordable compliance tools [that can] implement technology to assist them. We know that training must be ongoing and fluid. All of this is necessary to navigate regulatory expectations and maintain operational resilience and excellence."
Prevalent compliance concerns emerging across states
Regulatory uncertainty
Federal recalibration and state variability create fragmented compliance obligations. Multi-state institutions face heightened complexity as states consider new consumer protection measures and privacy laws.
"In every institution we talk to, banks remain vigilant," says Keller. "Institutions are not taking their foot off the gas."
To stay ahead, banks should maintain robust regulatory monitoring and build strong relationships with state regulators. Proactive engagement can prevent surprises and reduce compliance risk.
Operational pressures
"Bankers remain in a posture of not only competition amongst themselves, but [also] competition from external players," said James Ballentine, Founder/CEO of Ballentine Strategies.
Rising compliance costs, mergers & acquisitions activity, and credit union competition add strategic strain, forcing banks to balance growth with compliance rigor.
Allocating resources toward exam preparation and leveraging technology to optimize compliance efficiency can help institutions manage these pressures without sacrificing quality.
Talent and resource constraints
"We're not hearing of cutting back compliance resources," said Keller. "But talent retention and succession planning…[have] always been a concern."
Compliance staffing stability is threatened by retirements and burnout, while regulators themselves face resource limitations, impacting examination processes.
Banks can mitigate these challenges by supplementing in-house teams with external advisors or virtual compliance officers, and investing in succession planning and training programs to maintain compliance resilience.
Fraud risk escalation
Fraud dominates cost centers, with cyber fraud and check fraud emerging as some of the most prevalent types today. Institutions are investing heavily in detection and prevention to protect assets and reputation.
"Other things that BSA officers are likely doing that we understood from our research was [that] they're relying on resources like check fraud directories and alerts from various organizations," added Elaine Rudolph-Carter of NetBankAudit.
Strengthening fraud detection frameworks and leveraging advanced monitoring tools can help banks identify threats early and minimize losses. Heavily investing in fraud prevention isn't just a best practice to safeguard one's reputation; it's a business imperative.
Emerging technologies
AI adoption faces hurdles due to cost and knowledge gaps, while uncertainty around stablecoins and digital assets persists. Community banks remain cautious, at the risk of falling behind in innovation.
A thoughtful approach — starting with pilot programs and targeted staff training — can help institutions explore AI and digital asset strategies without overextending resources, positioning them for future innovation.
Start now, stay ahead, set the compliance standard
"We are not necessarily in a deregulatory environment," says Keller. "We are just in a shifting environment of changes in prioritization…. But there is a lot of stability in the banking system."
Regulatory uncertainty isn't going away, but neither is the need for strong compliance programs. Staying informed about regulatory trends, especially where exam preparation is concerned, is crucial as priorities evolve.
By combining proactive monitoring, technology adoption, and strategic resource planning, banks can stay ahead of emerging risks and maintain operational resilience.