With remote work seemingly here to stay for the long haul, financial institutions have faced unique compliance challenges in the past several years that were unprecedented before the COVID-19 pandemic. This unexpected shift in how business is done has led to said financial institutions – particularly banks for the purposes of this blog – to find ways to meticulously address and manage how to remain in compliance and ensure safe and secure operations. After all, regardless of outside pressures such as pandemics, regulations remain and must be followed.
So how can banks ensure that utilizing remote employees won’t lead to compliance risks? Below, we outline the primary compliance concerns and regulatory requirements pertinent to remote bank employees.
For banks, securing data and ensuring the protection of sensitive financial information is paramount. Utilizing information cybersecurity systems such as ISO/IEC 27001:2002 is a critical step in protecting this data, and their accompanying standards provide a framework for managing security risks associated with mobile devices and teleworking. It is essential that banks enforce policies that manage physical device security, malware protection, access controls, and encryption. Additionally, regular security awareness training is crucial to maintain vigilance against potential security breaches.
No longer do companies *only* have to worry about the security of one central office being compromised – now dozens, if not hundreds, of its employees may be scattered across the world in little ‘mini offices’ of their own. Data protection must be exceedingly robust, with Joe and Jane’s home offices as secure from potential bad actors as the company’s home office.
2. Technology and Infrastructure
To that end, banks must ensure that their technology infrastructure supports secure and efficient remote work. Unstable, slow networks or systems that cannot handle the load of external users are not conducive to an adequate remote workforce. Banks must provide adequate VPN bandwidth and licenses, using corporate-managed devices, and ensure that the aforementioned robust cyber-defenses are in place. Indeed, the rapid shift to remote work since 2020 has prompted many institutions to work proactively within the evolving financial landscape, accelerating their adoption of cloud services and strengthening their IT support. Maintaining one’s current systems and adopting a ‘business as usual’ mindset – while simultaneously allowing remote work among bank employees – is a dangerous combination that may soon lead to overloaded systems and compliance alerts.
3. Regulatory Supervision
It is well established that financial institutions must continue to meet all regulatory requirements, even in a remote environment. As we mentioned above, external influences – as awful and difficult as they may be – do not change the necessities of remaining in strict compliance with the law. To ensure that these requirements are met to the letter, banks should always maintain a compliant supervisory system that is adaptable to remote operations. To help protect their bottom line and demonstrate their careful adherence to regulations, it is a good rule of thumb for banks to document any and all changes to their supervisory and compliance policies due to remote work arrangements.
4. Risk Management and Fraud Prevention
Managing risk should be part of any financial institution’s day-to-day operations, and pivoting appropriately to include remote work also includes finding ways to follow the necessary industry rules while keeping risk low. Regulators have a famously low tolerance for banks who try to find loopholes or workarounds, such as discussing business via non-secure channels. Although previous ways of doing business have required some effort to manage and update with the current times, risk management in the banking industry isn’t exactly optional.
With a less centralized and more far-flung network of systems and hubs, the risk of fraud inescapably increases with remote operations, particularly under high-stress conditions such as a global pandemic. Banks must remain vigilant against fraud, particularly against phishing scams and similar deceitful attempts against their remote employees who may not be fully knowledgeable when it comes to scammers’ sophisticated hacking methods. It is imperative that banks take firm steps to ensure compliance with regulations from bodies like the Financial Crimes Enforcement Network and the Office of Foreign Assets Control, which expect institutions to guard their systems, and their customers, against exploitation by fraudsters.
5. Training and Policy Updates
With the vast work involved in keeping the essential puzzle pieces above properly aligned with industry regulation, it’s no surprise that continuous training and updating of policies are necessary to address the dynamic challenges posed by remote work. Employees should be regularly trained on compliance matters, security protocols, and the bank’s expectations of their conduct when working remotely. This includes understanding phishing attempts and how to address them, clear policies regarding the management of their workspace, staying within compliance when it comes to customer communication, and strict guidelines regarding the use of company equipment, among many others.
6. Employment Law Compliance
Not all considerations in regards to remote work directly involve what your employees should and shouldn’t do if working away from the office. They can also add an increased layer of difficulty to banks’ legal requirements for employing them altogether. Remote work complicates tax and payroll obligations, especially when employees work across state or even international borders. Employers must carefully determine the appropriate state for tax withholding and unemployment taxes based on where the remote work is performed, adhering to the ‘physical presence’ rule. This issue can become even more complex if banks employ a worker or workers who occasionally work in multiple states.
Compliance with local employment laws is also essential when managing a remote workforce. This includes adhering to minimum wage laws, overtime regulations, and worker classification laws to correctly distinguish between employees and independent contractors. Misclassification can lead to significant legal and financial repercussions.
Protect Your Customer, Your Employee, and Yourself
Navigating the complexities of remote work compliance requires banks to implement robust systems and procedures that address security, regulatory, and operational challenges. By staying informed about the evolving legal landscape and adopting best practices, banks can effectively manage their remote workforce while remaining compliant with all necessary regulations, whether federal, state, or local.
The migration towards remote work over the past several years doesn’t just require a new look at technology advancement and adaptation, but also a deep commitment to regulatory and compliance frameworks that protect both bank operations and their customers. Banks that tackle these issues head on, while staying flexible in the ever-evolving financial landscape, are well positioned to set their employees up for success, while remaining well within regulatory boundaries.