Bad data, worse consequences: The rise of regulatory fines in financial reporting

In November 2024, Metro Bank, the UK’s first new high-street bank for over 150 years, was fined £17m for failing to correctly monitor £51bn of transactions for money laundering risks between June 2016 and December 2020. It was a huge blow for the bank. It was also the latest incidence of a large financial service institution (FSI) falling short of their regulator’s reporting and monitoring standards, and paying a significant price as a result. Metro Bank joined Citigroup UK and Standard Chartered on an illustrious list of banks that have received multi-million pound fines for sharing inaccurate data with regulators.  

These fines are at the extreme end of the scale. Big hitters are always likely to be heavily fined, especially considering the size of the errors involved. However, these mega-fines should serve as a warning to all FSIs, especially those still operating on legacy banking infrastructure, on the importance of timely and accurate financial closing. Metro Bank’s troubles, after all, were due to “an error in how data was fed into the system”, according to the UK’s Financial Conduct Authority (FCA). And as more and more regulation is introduced, it’s only going to get harder for FSIs to stay compliant, with mistakes becoming increasingly costly to make.  

Up to 25% of the month can be spent on complex financial closing

As any FSI knows, the regulatory burden on the financial sector has increased and evolved significantly in recent years. Markets in Financial Instruments Directive II (MiFID II) and  Common Reporting Standard (CRS) in the EU; Financial Crimes Enforcement Network (FinCEN) Regulations in the US; and the Edinburgh Reforms (ERs) in the UK are just a few of the new regulations FSIs must now comply with, significantly increasing both the time spent on financial closing and the risk of non-compliance.  

A 2023 Deloitte survey found that 47% of financial leaders spent more time on financial close than any other process. It varies greatly between FSIs of different sizes, but the average month-end close takes three to six business days. That’s roughly between 13% and 26% of each working month.  

The truth is, many FSIs simply don’t have the procedures in place to close confidently, quickly and compliantly. Processes in accounting and finance operations are often intricate and resource-intensive, involving multiple systems and departments. Navigating this complexity while maintaining efficiency, low error rates, and timely execution is essential but challenging.

How can FSIs succeed where industry giants stumble?

Many fines that FSIs receive come down to a lack of completeness and accuracy, both essential components of financial closing. Breaking either of these will impact regulatory reporting, immediately placing FSI in fines-territory.  

Centralized, accessible, and real-time data can change this, making it easy for teams to track and report data over time. It also helps speed up processes, and adapt to new regulations and avoid audit penalties. FSIs can minimize the need to move data and streamline their finance processes by using a tool that centralizes reconciliations, allows for manual adjustments and substantiates workflows. This establishes a proven audit trail with integrated compliance and governance standards, reducing the effort for internal and external auditors.

Not only does this help keep FSIs compliant, and therefore help them avoid regulatory fines, but it can contribute to a significant reduction in costs by consolidating systems onto a single platform. In a world where even the biggest FSIs struggle to stay compliant, taking control of financial closing isn’t just a regulatory necessity, but a chance for FSIs to futureproof their business and gain a competitive advantage.