Finance First: How the Financial Industry Goes Paperless and Stays Compliant

Business.com / Finances / Last Modified: February 22, 2017

Implementing document management software is not yet a legal necessity, but that could change during fiscal 2016. Learn more.

Document retention is a big issue in the financial industry, with agencies from the Federal Deposit Insurance Corp., the Financial Industry Regulatory Authority and the Securities and Exchange Commission requiring accurate records from the past five or more years in order to maintain compliance.

Implementing document management software is not yet a legal necessity, but that could change during fiscal 2016, as the SEC plans to bolster oversight by adding 225 staff members.

Many major institutions have already rolled out paperless platforms, which make audits by the SEC and other regulatory bodies run more smoothly.

More Than Just Going Green

Last year, Canon Business Process Services performed a study that found that more than 62 percent of respondents still manually handle more than 75 percent of their annual invoice volumes. Human resource records can become even bigger headaches when continuing certifications, tests, and specialty training must be tracked in addition to regular personnel records.

The Paperless Project notes that average workers spend 30 to 40 percent of their time searching for information stored in email and filing cabinets — and that a typical four-drawer cabinet houses about 10,000 to 12,000 records and costs $1,500 per year. In addition, large organizations lose a document every 12 seconds, which can cost a company $350 to $700 apiece.

In a form-driven industry, going paperless can reduce error rates and wasted time and can automate repetitive manual data entry.

Whereas paper documents are susceptible to theft, manipulation, or loss during office break-ins and natural disasters, cloud-based document management software can protect data in those circumstances. With CFOs and other top-tier financial decision makers being held to higher security standards, going paperless benefits corporate risk mitigation beyond simple process improvements and efficiency gains.

Paperless Solutions to Consider

In the digital age, paperless business solutions are readily available for a variety of redundant tasks. Like most enterprise applications, these solutions are increasingly moving toward cloud-based or cloud-hybrid applications. There are three key paperless solutions to consider in the financial sector.

Electronic Signatures

First is the implementation of electronic signatures. Both DocuSign and RightSignature enable easy integration into Microsoft Word, Adobe Acrobat, and other document creation and editing software. This allows for fast and easy signature processing while improving workflow, as it eliminates the need to wait for a courier to hand-deliver documents requiring a signature.

Optical Character Recognition Systems

Next, optical character recognition systems can automate data entry and increase productivity and efficiency. Data entry is laborious and expensive, but in a form-based environment, enterprise optical character recognition programs automate the operation. These programs can even be configured to recognize specific fields on standardized forms for easy digitization of only certain information. Plus, a searchable catalog is much more efficient than a filing cabinet.

Document Management System

Finally, using a document management system such as my company is a much more secure method of storing and retaining documents than housing them on any drive within a network. Regardless of which payroll, financial, tax, or business application is generating content, it can be stored in a secure DMS to enable efficient compliance management.

This centralized database with role-based security features enables each unit in an organization to access, send, update, and route documents while remaining in compliance.

Migrating to a Paperless Solution

Implementing a paperless solution can seem confusing and feel overwhelming, but it’s not if you take the migration step by step.

1. Start from today and move forward. Business can’t just halt while documents are scanned and filed into a management system. Work forward, making sure paper is touched only once, and after the process is comfortable, allocate lower-cost employees to work at scanning in the backlog.

2. Select a system. Ensure the platform complies with third-party audits such as SOC 2 and SSAE 16, as well as standards like ISO/IEC 27001, the Health Insurance Portability and Accountability Act, and payment card industry security standards.

3. Build templates. Know how you want the electronic filing system to be organized, and solicit input from all business units. Proper testing during each design phase is essential so everything works as planned.

4. Be consistent. Once templates and naming systems are designed, stick with them and train all staff members on how to use the new systems within their business units. Update all training materials.

5. Scan everything. Make a conscious, coordinated effort to immediately scan any paper documents received. Use the DMS as a centralized document warehouse.

Ensuring Compliance and Security

When selecting a paperless solution, ensure that compliance with the regulations or standards you need to meet is included in the service agreement, and sign a nondisclosure agreement. If vendors aren’t willing to put it in writing, reevaluate their credibility.

Moreover, make sure you can access all the functions and features you need. A proper DMS solution should include:

  • Write Once, Read Many Compliance, which preserves records in a non-rewritable, non-erasable format.
  • A Detailed Audit Trail, or a tracking system with time/date stamping and identification of any user or system changes to data facilitates audits.
  • A Robust Retention Policy, in which the time/date stamp automatically enables retention for regulatory requirements.
  • Data Encryption, e.g. the 256-bit end-to-end Advanced Encryption Standard.
  • Third-Party Regulatory Compliance, because data centers used by cloud services should be at least as compliant as your organization.
  • Redundant Backups, meaning all information should be backed up to a remove server, fully redundant, and maintainable without impact to operations.
  • Role-Based Security, which limits access by user-based permissions, allowing for maximum security and efficiency.

Note that neither FINRA nor the SEC certifies any technological system as “compliant.” Only a thoughtful combination of procedures and enabling technology creates compliance.

Using a DMS does not automatically make your company compliant. However, employing the appropriate technology can ease the burden and the cost of maintaining compliance. The right DMS can help you become more efficient, improve profitability, and increase productivity.

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