How SOX Compliance Tools Can Enable Banks to Get Started with Compliance Technology

As compliance technology becomes more accessible, more banks are dipping their toes to understand how they can utilize the technology to improve their bottom line. This approach is laudable and very appropriate for the modular compliance solutions that are en vogue these days. Their modular nature means that businesses can implement one use case and scale when appropriate.

SOX compliance has emerged as a great starting place for bank tech implementations because of the requirements set forward by the Sarbanes-Oxley Act. SOX compliance solutions provide banks with a glimpse of what compliance automation can bring to their organization and how it will function within their compliance framework.

SOX Compliance as a Starting Point

What makes SOX compliance such an ideal candidate for initiating a tech implementation is the fact that SOX compliance is a piece of enterprise-wide compliance. It thus provides insights into how compliance technology will influence the organization and what the ROI will be on the implementation.

Enterprise-wide Coordination

The biggest reason that SOX compliance provides such an insightful view into compliance technology is that it requires the whole organization to collaborate. Complying with SOX means that each department within the organization must provide the required data and reports. This is also where a lot of productivity losses are observed. Collecting all the documentation and ensuring that everyone completes their reports on time can be an administrative challenge.

SOX technology can show how these parts of the process can be made faster. Does the technology help people collaborate faster and easier? If the answer is yes, then management can surmise that the same solution will be beneficial for other compliance processes as well.

Documentation Woes

Businesses struggle with managing all the documentation that is required for compliance. The compliance teams spend a considerable time simply managing the inflow and outflow of documents. SOX compliance requires the whole organization to produce reports and send it to the compliance team who then creates another report from all these reports, highlighting all the necessary disclosures.

SOX compliance solutions enable banks to see how document workflow and management will be handled. Modern compliance management solutions have document management systems built in. These systems make the process not just faster but also more audit friendly, as all changes to documents are logged within the system. This helps a lot with SOX compliance, as keeping a log of changes to financial documentation is a core requirement of SOX compliance.

What makes SOX compliance such an ideal candidate for initiating a tech implementation is the fact that SOX compliance is almost a microcosm of enterprise-wide compliance. Click To Tweet

Routine Compliance

Compliance isn’t something which the organization needs to accomplish once. It is a continuous task which requires the organization to follow a strict routine. SOX compliance requires periodic reports and disclosures. This means that the whole organization needs to ensure that the requirements are met periodically. A routine needs to be set that makes it easier for the compliance team to make the disclosures required in time.

This pattern is very similar to many other types of compliance work. SOX compliance solutions help banks assess how a solution helps in routine compliance maintenance and reporting. Banks and businesses can note how long it takes the whole process to be completed and how common mistakes are – it is easier to assess performance in routine tasks.

Isolated Outcomes

Whenever something is chosen as a test subject, it is important that all negative externalities are managed. Compliance processes are dependent on each other, so changing one will affect other processes as well. SOX compliance is unique not just because the Sarbanes Oxley Act is newer than most other legislation that businesses must comply with; it is also unique because its requirements do not affect other parts of the compliance.

This means that the performance of SOX compliance does not hold back other parts of compliance, because no other compliance process is dependent on SOX. Banks can thus directly test the difference in performance between manual SOX compliance and automated A.I. powered SOX compliance without worrying about disruptions in the compliance domain.

Responsibility and Ownership

Finally, SOX compliance is a good test case because it benefits not just the compliance team but upper management of the organization as well. One of the strictest SOX requirements under Section 906 states that:

(a) CERTIFICATION OF PERIODIC FINANCIAL REPORTS. —Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a written statement by the chief executive officer and chief financial officer (or equivalent thereof) of the issuer.

‘‘(b) CONTENT. —The statement required under subsection (a) shall certify that the periodic report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

‘‘(c) CRIMINAL PENALTIES.—Whoever— ‘‘(1) certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $1,000,000 or imprisoned not more than 10 years, or both; or ‘‘(2) willfully certifies any statement as set forth in subsections (a) and (b) of this section knowing that the periodic report accompanying the statement does not comport with all the requirements set forth in this section shall be fined not more than $5,000,000, or imprisoned not more than 20 years, or both.’’.

In other words, management is personally responsible to ensure that all reporting requirements are being met. SOX compliance helps upper management quickly assess the state of compliance, ensure data accuracy, and monitor compliance issues. It thus not only protects the organization but the managers within the organization too.

Is your organization looking for ways to improve its compliance framework? Get in touch with our compliance experts for a demonstration of what our Predict360 SOX compliance module can do for your organization.