Regulatory obligations are the legal requirements and compliance duties imposed on financial institutions and other regulated entities by supervisory authorities. They define what firms must do to comply with anti-money laundering (AML), counter-terrorist financing (CTF), and financial crime laws.
These obligations shape daily operations for banks, payment service providers, fintechs, and law firms. From customer onboarding to transaction monitoring, regulatory obligations ensure that institutions operate within defined legal and ethical boundaries.
Regulatory Obligations
A regulatory obligation is a legally binding requirement that institutions must follow under financial crime and compliance laws.
Examples include:
Customer due diligence (CDD): Verifying and monitoring client identities.
Sanctions and watchlist screening: Preventing transactions with sanctioned or high-risk parties.
Suspicious activity reporting (SARs): Escalating unusual activity to regulators.
Record-keeping: Maintaining accurate transaction and client records.
Risk-based approach: Applying controls proportionate to the risk level.
The Financial Action Task Force (FATF) outlines global AML obligations through its Forty Recommendations, an international standard adopted by over 200 jurisdictions worldwide.
Why Regulatory Obligations Matter
Meeting regulatory obligations protects financial institutions, markets, and societies from exploitation by criminals.
The UK Financial Conduct Authority (FCA) requires firms to establish effective systems and controls to prevent financial crime, embedding regulatory obligations into everyday operations.
Failure to meet obligations can result in:
Regulatory fines and enforcement actions
Loss of licenses or business restrictions
Reputational damage and loss of customer trust
Increased exposure to money laundering and terrorism financing
Key Regulatory Obligations In AML Compliance
AML frameworks define specific obligations across multiple areas.
Customer Screening And Due Diligence
Financial institutions must identify and verify clients. Tools like FacctView for Customer Screening support onboarding and monitoring.
Payment And Transaction Monitoring
Firms must monitor payments and activity for suspicious behaviour. FacctShield for Payment Screening and FacctGuard for Transaction Monitoring provide these safeguards.
Reporting And Case Management
Suspicious activity must be reported to regulators in a timely and auditable manner. Alert Adjudication enables efficient case handling and compliance reporting.
Watchlist Management
Maintaining accurate sanctions, PEP, and adverse media lists is mandatory. FacctList for Watchlist Management ensures compliance data is reliable and updated.
Regulatory Obligations In Practice
Meeting regulatory obligations requires alignment between people, processes, and technology.
Institutions must:
Develop AML/CTF policies reflecting local and global obligations.
Train staff to recognise and escalate suspicious behaviour.
Use compliance platforms to automate and scale obligations.
The Bank for International Settlements (BIS) has highlighted that integrating advanced analytics into regulatory and compliance frameworks can help firms better meet their obligations by improving the detection of money laundering risks while reducing inefficiencies.
The Future Of Regulatory Obligations
Regulatory obligations are evolving to address emerging risks and technologies.
Future trends include:
Digital assets regulation: Expanding AML obligations into cryptocurrency and blockchain activity.
AI oversight: Regulators like FATF and FCA expect explainability and transparency in AI-driven compliance tools.
Real-time obligations: Moving away from periodic checks to continuous monitoring requirements.
Cross-border harmonisation: Aligning obligations globally to reduce regulatory arbitrage.
These changes signal that regulatory obligations will become more dynamic and technology-driven, requiring institutions to adapt quickly.
Strengthen Your Regulatory Obligations Compliance Framework
Regulatory obligations are non-negotiable for financial institutions. By embedding them into compliance frameworks supported by technology, firms can reduce risks, satisfy regulators, and protect financial integrity.
Contact Us Today To Strengthen Your AML Compliance Framework
