Agefi Luxembourg - mars 2025

AGEFI Luxembourg 16 Mars 2025 Economie I n today’s complex financial land- scape, regulatory compliance is no longer just an obligation and burden—it has become a strategic necessity. TheComplianceMonito- ring Plan (CMP), also referred to as theComplianceMonitoring Program, serves as a cornerstone for fi- nancial institutions seeking to ensure regulatory adhe- rence and indirectly en- hances operational resilience by ensuring that business processes re- main robust, efficient, and alignedwith regulatory expectations. A well-crafted CMP not only helps assess and mitigate compli- ance risks but alsoplays avital role in strengthening corporate governance. By enhancing oversight, transparency, and accountability, it supports effec- tivedecision-makingat the seniormanagement and board levelswhile promoting soundbusiness prac- tices. Additionally, a strong CMP fosters trust with key internal and external stakeholders, including regulators, investors, and clients, by demonstrating a firm commitment to compliance, responsible risk management, and long-term sustainability. Moreover,asregulatoryexpectationscontinuetorise, financial institutions that proactively implement a strong CMP gain a competitive edge by showcasing their agility, adaptability, and resilience innavigating an increasingly complex regulatory environment. Regulatory and technical aspects The foundationof a robustCMP lies ina clearunder- standing of the regulatory environment and its risks. Financial institutions must navigate a dense web of regulations, including EUdirectives (such as UCITS, AIFMD,MiFID,AMLD,andGDPR)andlocalsuper- visory requirements. These regulatory frameworks impose stringent obligations, ranging from investor protection to anti-money laundering measures, re- quiring firms to maintain continuous oversight and compliance. While there is nopredefined format set in the regula- tion, theCMPshouldbe structuredaroundkeycom- ponents to ensure effectiveness: - Risk-based approach - Identifying and prioritising compliancerisksbasedontheirpotentialimpact.This involvesclassifyingrisksbasedonseverity,frequency, and regulatory implications througha robust riskas- sessment, allowing firms to allocate resources effec- tively and focus onhighpriority areas. -Monitoringmethodologies- Utilisingbothpreven- tive and detective monitoring techniques, including periodiccontroltestingandongoingsurveillance.Pre- ventive measures include policy updates, staff train- ing, and automated controls, while detective mechanisms involve transaction monitoring, audit trails, and exception reporting. -Issuetracking,remediation,andreporting- Estab- lishing clear processes to document and follow up on remedial action plans, ensuring that identified gaps areaddressed ina timelymanner. Reporting to senior management, boards and regulatory bodies is a crucial element, reinforcing transparencyandac- countability. Beyond regulatory compliance, financial institutions must integrate compliance monitoring within their broader riskmanagement frameworks. Effective co- ordinationwithkey control functions (suchas the in- ternal audit and risk management functions) is essential to ensure a consistent approach to risk iden- tification,assessment,andmitigation.Thiscross-func- tionalintegrationhelpspreventinefficiencies,reduces theriskofoversightgapsandminimisescostlydupli- cation of efforts, fostering amore robust and resilient compliance ecosystem. The increasing role of technology Technology plays an increasingly vital role in the implementation and efficiency of a CMP. There are two primary options for establishing a CMP: man- ually (e.g., Excel spreadsheets) or digitally (e.g., ded- icated third-party tools). While smaller firmsmight opt formanual solutions at thebeginningdue tocost and time considerations, digital tools offer signifi- cant advantages in terms of automation, scalability, and auditability. Pros and cons of manual vs. digital CMPmana- gement ManuallymanagedCMP Pros: -Lowercostintheshortterm- makingitmoreacces- sible for smaller firms. -Flexibility- customisabletofitspecificneedswithout vendor-imposed limitations (e.g., risk assessment methodology, reporting formats). Cons: - Time-consuming - requires manual data entry, tracking and reporting,which increase the likelihood of errors. - Scalability issues - becomes cumbersome as com- pliance requirements grow in complexity and team evolves,makingmanualmanagementimpracticalfor larger firms. - Weak audit trail - harder to maintain a secure and structuredauditlog,whichmayraiseconcernsinreg- ulatory examinations. DigitallymanagedCMP(third-partysoftwaresolu- tions) Pros: -Automation - reducesmanualworkloadwithauto- matedworkflows, alerts, stakeholders reporting and follow-upactionplanenhancingefficiencyandreduc- inghuman error. - Regulatory updates - regulatory inventory and re- quirements updates embedded within the CMP to ensurethatregulatorychangesareautomaticallyand regularly capturedwithin the firms’ CMP. - Scalability - adaptable as the organisation expands or regulations evolve, allowing for seamless adjust- ments tonewcompliance requirements. -Collaboration-friendly- multi-useraccesswithver- sion control, maker/checker features and audit trails, ensuring consistency and transparency across teams. - Advanced analytics - modern platforms offer real-timedashboardingcapabilitiesandpredic- tive analytics to identify potential compliance risks proactively. Cons: - Higher cost - licensing fees, implementation costs,andpotentialcustomisationexpensescan bemoresignificantatthebeginning,making it a less attractive option for smaller firms. - Dependency on vendor - subject to vendor reliability, support, and updates, as wellasdatasecurityrisksif not properly managed, including DORA-related requirements. Small financial institu- tions with limited com- pliance needs (e.g., a small number of managed funds, lower AuM, or a narrower scope of activity) may decide to start with a manual solution to tackle their compliance requirements and keep track of the controls performed, even though a digital solution could bring them additional comfort in the set-up of their compliance function. However, as compliance complexityincreases,transitioningtoadigitalsolution becomes increasingly important to ensure efficiency, accuracy, and regulatory alignment. Organisations should assess their specific needs and risk exposure to determine the approach that is best suited to their activity. To accompany firms into this digital transition, PwCLuxembourghas recentlyde- veloped a digital service enabling compliance func- tionstorelyonanall-in-onesolutionguidingtheusers through the setup andmaintenance of the applicable regulatory environment, the risk assessment defini- tionofthemaincomplianceareas,themonitoringand performanceofthecompliancecontrolsaswellasthe reporting of the controls’ outcome. Common challenges in compliancemonitoring Despite its importance, many organisations struggle withimplementinganeffectiveCMPduetocommon challenges: - Completeness of compliance risk identification - Financialinstitutionsoperateinanenvironmentwith avast andever-evolving regulatory landscape.Akey challenge is to ensure the exhaustiveness of compli- ance risk identification, given the high volume of ap- plicable laws and regulations. Failure to map out all relevantriskscanleadtoregulatorybreaches,reputa- tional damage, and financial penalties. An effective CMP should incorporate a dynamic risk assessment model that continuously updates in response to reg- ulatory changes. - Granularity of compliance risk assessment (top- down vs. bottom-up) - Organisations often struggle withthelevelofdetailintheirriskassessments.Atop- downapproachmayoverlookoperational-levelrisks, while a bottom-up approach can result in an over- whelmingvolumeofgranularriskswithoutclearpri- oritisation. Striking the right balance is essential to ensure a comprehensive yet actionable risk assess- ment andmonitoring. Best practices include leverag- ing risk matrices, heat maps, and workshops with business units to identify critical compliance threats effectively. -Calibrationofcontrolstestinganddocumentation - The effectiveness of compliancemonitoringdepends on a well-calibrated control testing process. Institu- tionsmustaligncontroltestingwithrisk-basedprior- ities, ensuring that key risks are adequately covered. Additionally, properdocumentationof controlsper- formed is critical—not only for regulatory scrutiny but also to ensure an audit trail is maintained throughouttheprocessandtoeasecollaborationwith thethirdlineofdefence(internalaudit).Withoutclear documentation, internal audit teams may face chal- lenges in validating compliance efforts, weakening the three lines of defence model. Organisations should adopt standardised testing procedures and maintaindetailedevidencetoensuretraceabilityand audit readiness. Strategic value of an effective ComplianceMonitoring Plan Despite the challenges, a well-structured CMP pro- vides significant strategic and operational benefits, turning compliance froma regulatoryobligation into a competitive advantage: - Proactive compliance riskmanagement –Arobust CMP enables organisations to identify and mitigate compliance risks before they escalate into regulatory breaches or reputational damage. By embedding a risk-based approach, institutions can focus resources onhighpriority areas and enhance overall resilience. - Operational efficiency and cost savings – By streamlining compliance processes through struc- tured monitoring, firms reduce redundancies, opti- mise resource allocation, and prevent costly remediationefforts.Automationanddigitalsolutions furtherenhanceefficiencybyreducingmanualwork- load and improving accuracy. - Regulatory confidence andmarket credibility –A strongCMPdemonstratescommitmenttoregulatory adherence, fostering trust with regulators, investors, and clients. Institutions with a proactive compliance culture are better positioned to handle regulatory scrutiny and avoid enforcement actions. -Enhanceddecision-making –Compliancemonitor- ing generates valuable insights that support strategic decision-making at both the operational and leader- shiplevels.Byleveragingdataanalyticsandreporting, firms can identify trends, anticipate regulatory shifts, and alignbusiness strategies accordingly. - Business continuity and competitive advantage – Organisations that integrate compliance into their broaderriskmanagementframeworkgainacompet- itive advantage. A resilient compliance structure not onlyprotects against legal andfinancial risks but also supportssustainablegrowthbyensuringbusinessop- erationsremainalignedwithregulatoryexpectations. By viewing compliance monitoring as an enabler rather than a constraint, financial institutions can transform regulatory obligations into opportunities for continuous improvement, operational excellence, and long-termsuccess. Conclusion A well-structured Compliance Monitoring Plan is more than just a regulatory requirement—it is a strategicpillar that strengthensoperational resilience andlong-termsustainability.AligningtheCMPwith business activities and the evolving regulatory land- scapeenablesfinancialinstitutionstotransformwhat is often seen as a compliance burden into a source of competitive advantage. As regulatory scrutiny con- tinues to intensify, organisations that proactively in- vest in comprehensive and dynamic compliance monitoring frameworks will be better equipped to navigate complex risks and ensure sustainable growth.Byleveragingadvancedtechnologies,foster- ing cross-functional collaboration, and continuously refining riskassessmentmethodologies, financial in- stitutions can not only meet regulatory expectations more effectively but also enhance their agility, oper- ational efficiency, and overall stakeholder trust. Nicole SCHADECK, Director - Regulatory Compliance, driving the CMP initiative Anthony BIANCO, Partner - InternalAudit &Regulatory - AssetManagement &Alternatives, PwC Luxembourg The ComplianceMonitoring Plan: a strategic and regulatory imperative L eministre des Finances, Gilles Roth, a participé aux réunions de l'Eurogroupe et duConseil des affaires écono- miques et financières (ECOFIN) à Bruxelles les 10 et 11mars 2025. Lorsde la réunionde l'Eurogroupedu10 mars, les ministres des Finances ont abordé les perspectives macroécono- miques pour la zone euro et ont mis en évidence les défis à venir concernant la coordination des politiques budgétaires. Cettediscussionaétésuivieparplusieurs sujets clés, notamment le suivi de la réu- niondefévrierdesministresdesFinances etdesgouverneursdesbanquescentrales duG7, ainsi que l'évolution desmarchés descryptoactifsetleursimplicationspour la zone euro et l'économie européenne. Les ministres ont, en outre, préparé le sommet de la zone euro demars. Renforcer la coordination des politiques économiques Dans le cadre de la réunion du Conseil ECOFIN du 11 mars 2025, les ministres ont poursuivi leurs discussions sur la compétitivité et l'amélioration de l'envi- ronnement des entreprises en Europe. Un accord a par ailleurs pu être trouvé sur la proposition de directive en ma- tière de coopérationfiscale (DAC9). Les ministres ont également échangé sur les répercussions économiques et finan- cières de l'agression de la Russie contre l'Ukraine et le financement de l'effort de défense. Ces discussions ont permis de renforcer la coordination des politiques économiques et de préparer les pro- chaines échéances internationales, no- tamment celles du G20 et du FMI. GillesRoth adéclaré : "Il est essentiel que l'Europe envoie un signal fort d'unité et de solidarité. Notre sécurité et notre dé- fense demandent une action et un effort communs. C'est dans cet esprit que nous saluons l'orientation du récent paquet défense présenté par laCommission eu- ropéenne." Source : ministère des Finances Gilles Roth à l'Eurogroupe et au Conseil ECOFIN à Bruxelles : «L'Europe doit envoyer un signal fort d'unité et de solidarité » ©MFIN