Compliance Laws for Financial Institutions

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Recommended: Manual and computerized auditing

1. Introduction Financial institutions are required by law to comply with several regulations which ensure protection of their client’s private information and be able to detect any risk of occurrence of identity theft or fraud. As such, auditing detects errors of both accidental and intentional nature such as fraud, incorrect input, missing figure, duplication or inconsistence. Auditing companies are complying with the laws and the changing technology in the financial institutions such as online banking by application of Computer Assisted Audit Techniques (CAATs) like Audit Command Language (ACL), Interactive Data Extraction and Analysis (IDEA) and excel spreadsheets. Financial institutions are required to comply with the following laws. 2. Compliance Laws 2.1 Gramm-Leach-Bliley Act (GLBA) Weiss & Solomon, 2011) Gramm-Leach-Bliley Act was introduced in 1999 to protect the financial privacy of the consumers in the financial institutions at the same time introducing reforms in the financial services industry. The act covered financial institutions which are required to protect the privacy of the client’s financial issues. All businesses were expected to be compliant not later than July 1, 2001. The Federal Trade Commission (FTC) and other selected government agencies were directed by the Act with the responsibility of Implementing the regulations of the Act's financial privacy provisions (GLB Act). Compliance with the privacy requirement of the Gramm-Leach-Bliley Act is imposed on the financial information’s which are involved in activities of financial nature such as lending, investing, brokering or servicing loans, career counseling, stock exchange dealers among others in the same... ... middle of paper ... ...sed to test for the validity of information by utilizing complex methods like the monetary unit sampling which are not easy by other techniques. Lastly, excel is very effective to test duplication of information especially those involved with payment. 4. Conclusion The Auditing tools presented in this research checks for errors in the company records with an aim of providing the financial institutions with helpful insights on the validity and adherence of their records with the true and fair position of the company. With compliance of the financial institutions with the laws regulating the usage and exposure of their clients’ personal information and using the technology for auditing their records, the financial institutions will not only reduce instance of fraud but also reduce the costs associated with losses, lawsuits and bad image linked to financial scandals.

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