Managed Services Bridging Skills Deficiency: Achieving Strategic Compliance Through Expert Assistance
In the ever-changing world of finance, compliance has become a critical yet challenging aspect for financial institutions (FIs). A growing shortage of skilled resources available in the market for compliance roles, coupled with the increasing complexity of regulatory demands, has led to a significant trend - the outsourcing of compliance functions to managed services companies.
This shift towards tech-enabled managed services is a significant driver behind this trend. Outsourcing models, often seen in Business Process Outsourcing (BPO) or Global Capability Centers (GCCs), now integrate AI-led automation and advanced RegTech to improve compliance efficiency, reduce costs, and address complex regulatory requirements in a rapidly evolving landscape.
Key dynamics driving this trend include the integration of AI and automation. FIs leverage AI-powered tools within outsourcing arrangements to automate routine Anti-Money Laundering (AML) tasks, enhancing speed, accuracy, and scalability while reducing human error and operational costs. AI systems provide continuous, real-time compliance monitoring compared to traditional periodic audits, enabling earlier detection of regulatory breaches and improving operational resilience.
Moreover, the trend is also driven by the response to increasing regulatory demands and complexity, particularly in the cryptocurrency domain. Regulatory bodies impose tighter AML and compliance standards, and outsourced compliance functions use AI to uncover subtle fraud patterns and connections beyond manual rule-based approaches, adapting quickly to new risks and changes in regulation via customizable no-code/low-code platforms.
Outsourcing AML/compliance to managed service providers in lower-cost jurisdictions offers cost reduction benefits while accessing specialized expertise and jurisdictional knowledge necessary for cross-border cryptocurrency compliance. Finance and accounting outsourcing providers are evolving with smarter, real-time reporting and tighter controls to keep pace with regulatory demands.
The rise of global shared services and capability centers integrates AI and digital transformation, positioning outsourced functions not only for compliance but also for strategic advantage and resilience within financial services. Financial institutions select outsourcing partners based on innovation, cybersecurity standards, and ability to drive AI-enabled automation, supporting transformative compliance frameworks in the cryptocurrency space and beyond.
Financial institutions engage with managed services providers to quickly provide resources for urgent compliance requirements, such as lookbacks for Know Your Customer (KYC) or AML, often due to regulatory enforcement actions. For instance, AML RightSource, a leading managed services provider, has trained resources and a train-the-trainer program for new projects and already provides services to several well-known crypto businesses.
However, the question remains whether banks should focus on recruitment, training, and retention of compliance staff and data analysts, or entrust some functions to external partners. A study conducted by AML RightSource and HFS reveals that about 30% of financial institutions will shift to permanent outsourcing arrangements for managed services over the next two years. The answer lies in a judicious balance between strategic vision and tactical agility, as outsourcing to managed services companies can provide valuable regional knowledge in navigating diverse regulatory landscapes across the globe.
Despite the growing trend, there are still challenges to be addressed. For instance, business school graduates may express a lack of specific coursework on financial crime fighting when considering a career in compliance. Furthermore, neo-banks and traditional banking organizations often struggle to find the right balance between determining risk appetite and meeting compliance demands.
Regulators are getting tougher across the globe with crypto providers, and financial institutions need to know about systems such as Chainalysis, CypherTrace, Elliptic, TRM Labs, etc., when doing business in the crypto-fiat currency intersection. The regulatory landscape is one defined by volatility and uncertainty, and the question remains whether banks should focus on recruitment, training, and retention of compliance staff and data analysts, or entrust some functions to external partners.
In conclusion, the trend of financial institutions outsourcing compliance functions to managed services companies is increasingly shaped by the interplay of AI, automation, and rising regulatory demands, especially in the cryptocurrency domain. This enables scalability, cost efficiency, and improved risk detection, while institutions retain key decision controls and regulatory oversight.
- In the realm of business, financial institutions (FIs) are increasingly relying on technology-driven managed services to enhance compliance efficiency and address complex regulatory requirements, particularly in the cryptocurrency domain, by leveraging AI-powered tools for automated Anti-Money Laundering (AML) tasks and real-time monitoring.
- As the regulatory landscape in finance becomes more volatile and uncertain, especially at the intersection of cryptocurrency and fiat currency, financial institutions are evaluating strategic partnerships with managed services providers for their specialized expertise, jurisdictional knowledge, and AI-enabled automation capabilities, to navigate diverse regulatory landscapes effectively.
