RegulationOct 17 2019

Regtech can transform your business

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Regulatory technology, or ‘RegTech’, may not have entered the capital markets consciousness to the same extent as fintech, but in our data-driven economy there is little doubt that RegTech’s benefits are providing major automated efficiencies and management oversight for financial services.

In this era of ever-changing regulatory requirements, RegTech is removing the pain points in customer onboarding and meeting the compliance requirements of AML, KYC and Regulatory Reporting, except of course for those companies that are still using the laborious manual route.

Those companies holding out and ignoring the advantages and empowerment of RegTech are losing out if they are not embracing it.

If done correctly, RegTech positions a firm’s compliance function to effectively transform their programme when required

In a nutshell, regulations are increasing in both quantity and evolving demands.

If done correctly, RegTech positions a firm’s compliance function to effectively transform their programme when required and innoculate the firm against constantly evolving regulatory risks.   

Successful implementations of RegTech solutions have enabled organisations to stay one step ahead of their competitors and in line with the increasingly advanced technological capabilities of regulators, who are better positioned than ever to identify misconduct and non-compliance.

Surprisingly however, there has been a suggestion that RegTech might be losing its momentum in the UK.

At this year’s Sibos conference, the Director of Innovation at the Financial Conduct Authority (FCA), Nick Cook, stated: “I think in the UK market, RegTech as an offering is somewhat struggling and plateaued at the moment. We see a reduction in the number of new entrants into the RegTech ecosystem.”

It would be surprising if Nick Cook’s take on this is a widely held view, especially given that cybersecurity, technology and market abuse surveillance are key focus areas for financial regulators across the globe.

Instead, the view should be that RegTech has never been more important.

Regulators globally expect firms to be more proactive than ever in detecting, preventing, and remediating compliance issues within their own operations.

However, it cannot be understated that meeting these expectations are costly, inefficient and in many cases impossible if an organisation just relies upon manual processes alone.

RegTech streamlines operational processes through its provision of automated, scalable and enterprise-wide solutions.

It enables users to access knowledge, produce instantaneous automated reports, conduct in-depth trade surveillance, mine data insights to provide complete overviews, utilise machine learning and recognise questionable patterns all in real time.

RegTech can be used to help asset managers effectively manage their firm’s risk and compliance programmes, and meet regulatory demands throughout their organisation, from the employee’s desktop up to the boardroom.

It helps firms - regardless of whether they are large or small - identify potential conflicts of interest in employee activities while simplifying the process for employees to submit approval requests and disclosures for gifts and entertainment, political contributions and any external business activities.

Are there downsides? Some might argue the cost of the RegTech solution itself.

But most would consider that any cost is more than offset by both RegTech’s automated functionality and the continuous updates keeping abreast of impending regulatory changes.

Most RegTech solutions also deliver the ability to leverage on the expertise of the providers’ team of compliance, technology, and cybersecurity professionals.

The efficiencies of RegTech enables the working hours of compliance staff to be devoted to more customer focussed activities or to investigating cases, rather than spending endless hours manually checking, analysing and compiling laborious and mundane statistics and data on an ongoing basis.

It would be interesting to hear if there are many senior executives in financial services organisations that doubt whether the automated reporting and insight analysis functionality generated by RegTech solutions are not a worthwhile solution.

Harnessing state-of-the-art and cost-effective technology demonstrably delivers productivity gains and this, together with containing costs, are key factors in staying competitive in a financial services market where focussing on customer experience, satisfaction, service and retention are essential factors in achieving sustainable long-term success.

RegTech ticks all the boxes: it delivers efficiency gains, reduces costs, reduces risk and can flag regulatory challenges before infringements occur.

Using it reduces the possibility of incurring fines or penalties for compliance errors and the resultant adverse publicity and reputational damage. Those, as cited by Nick Cook, wishing to ignore the benefits of RegTech may be doing so at their own peril.

Patrick Conroy is managing director of ACA Compliance Group