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Crucial Ways Regulatory Trends Are Impacting Internal Controls: Everything You Need To Know

December 4, 2023


Paul Dixon



Here is a reality that internal controls professionals are all experiencing in their day-to-day roles: Regulatory compliance tasks are increasingly taking up more bandwidth. But why is this? And what regulatory trends are shaping this change? And crucially, how will these trends continue to shape the internal controls profession?

This VOQUZ Labs report, accompanied by a LinkedIn Live Webcast, answers all these questions. Here is what we'll delve into:

  • Rocketing Regulations Globally
  • Surging Regulatory Fines for Non-Compliance
  • Increasing Automation in Regulatory Compliance

Rocketing Regulations Globally

The first trend impacting internal controls is an increasingly complex regulatory landscape due to a rapid increase in compliance obligations worldwide.

But why have regulations in jurisdictions rocketed in recent years? At a fundamental level, societal issues and geopolitical events such as accounting scandals, wars, corruption, money laundering, and other global threats have catalyzed a shift in regulatory frameworks.

For example, since 2022 - following the Russian invasion of Ukraine - research shows that sanctions laws have dramatically increased. Here is a slice of that data from significant jurisdictions for sanctions compliance:

  • EU +53%
  • US +22%
  • UK +65%

And the bottom line is this: It may not please everyone, especially company executives who want to do business fluidly and efficiently, but we now live in an increasingly regulated business environment.

But how is this impacting the internal controls profession?

To put this simply, companies - especially large organizations - are realizing that smarter, tech-driven internal controls has the potential to massively contribute to increasing regulatory compliance obligations.

In 2024 and beyond, internal controls professionals will increasingly need to upskill themselves with regulatory compliance competencies. In addition, as companies further embrace regulatory technology (RegTech) within their ERP systems, as a solution to intelligently meeting expanding regulations, internal controls teams will require advanced technical skills.

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Organizations are increasingly exposed to compliance requirements. Adopting innovative ways to assess and manage risk and enhance performance is critical. That’s where data analytics and continuous monitoring are helping to simplify and improve the internal control system, increase operational efficiencies, reduce costs, and detect fraud and errors earlier. Internal controls become a way for organizations to create value.

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Surging Regulatory Fines for Non-Compliance

The second trend impacting the internal controls arena are surging penalties for non-compliance. In a nutshell, regulators are now punishing companies for regulatory failings harder than ever.

So what's happening in easy-to-grasp terms? For example, according to the Financial Times, global anti-money laundering (AML) fines surged 50% in 2022. The data for 2023 has yet to be crunched - but all indicators suggest it will be another record-breaking year, especially with the US government's astounding $4.3 billion Binance penalty that included money laundering violations.

Another illustrative example comes from the US Securities and Exchange Commission (SEC). On November 14, 2023, they announced that it brought 784 enforcement actions totaling nearly $5 billion in financial remedies in 2023 (the SEC fiscal year ended on September 30). This is the second-highest amount in history.

But how is this impacting the internal controls profession?

Nothing delivers a message to a company more succinctly than a genuine threat of massive financial penalties. And what's happening is this: that message is trickling down, with rising strength, through organizations, especially towards compliance and internal controls teams.

In 2024 and beyond, as part of growing financial and reputational risk mitigation for non-compliance, the C-suite will double down on the popular mantra of internal controls for better compliance.

For example, more companies will incorporate sanctions and other business partner screening, such as politically exposed persons (PEP) checks, within their ERP system - a traditional internal controls environment.

Increasing Automation in Regulatory Compliance

The third trend affecting the internal controls landscape is the fast-growing adoption of regulatory technology - often referred to as RegTech - by companies worldwide.

RegTech uses technology (such as automation) to help companies in their regulatory monitoring, reporting, and compliance. Another way to look at it is like this: traditional manual processes associated with compliance are gradually being phased out as organizations adopt more efficient AI-powered, technology-driven approaches.

To give you an idea of the burgeoning size of the RegTech market, according to Fortune Business Insights, the global RegTech market size was valued at  $10.5 billion in 2022. By 2030, it's projected to surpass $60 billion - a CAGR of 24.9%.

But how is this impacting the internal controls profession?

The answer to this is simple. As the RegTech market rapidly expands, so will the types of regulatory compliance technology solutions penetrating traditional internal controls environments, such as a company's ERP system.

For example, remQ by VOQUZ labs fits under this umbrella and allows users to easily perform automated, real-time regulatory compliance tasks, such as sanctions screening, within SAP ERP or S/4HANA.

This service offering is a tangible example of internal controls and regulatory compliance integrating as companies seek efficiencies - a trend that will only grow stronger in 2024 and beyond.

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Learn More in Our Webcast: Regulatory Trends and Their Impact on Internal Controls

The key takeaway is this: The role of internal controls in regulatory compliance is growing fast. Both individuals and teams involved in the arena must adapt and embrace the changes in the profession.

A LinkedIn Live Webcast accompanies this VOQUZ Labs report. In the broadcast, we delve even deeper into the topic. You can also put faces and voices behind the remQ team!

How remQ Helps Regulatory Compliance Within SAP

Does your business use SAP ERP or S/4HANA? Embrace internal controls automation to give your organization all the tools it needs to meet regulatory compliance obligations regarding SOX (and similar), sanctions, PEP, ESG, and more.

VOQUZ Labs remQ Business Inspector software operates as a SAP add-on with a library of 100+ pre-built shipped controls ready to run. We would be delighted to answer any questions you have - contact us.

Watch our remQ introductory video here.


Paul Dixon

Paul is a RegTech content writer & strategist with extensive experience in digital marketing and journalism. His work has appeared in the Guardian newspaper. He also holds a degree in International Relations, where he studied global sanctions compliance and cross-border finance.


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