07/11/2020 by Wendy Gallagher 0 Comments
First steps on the long journey to programmable compliance
A FUTURE OF FINANCE WEBINAR WITH ASSET MANAGERS, TRANSFER AGENTS, FUND ADMINISTRATORS, WEALTH MANAGERS, BANKS, INSURERS AND MORE
Thursday April 22 2021, 14.00 - 15.00 UK time
RegTech is one of the more predictable targets of the FinTechs. The sheer volume of additional regulation imposed on the financial services industry after the financial crisis of 2007-08 demanded automation. Not just to contain the costs of data collection and reporting but to mitigate the risk of compliance failures leading to fines and reputational damage as well.
By 2018, a decade after the acute phase of the crisis, 11 major global banks alone had paid US$216 billion in fines for various breaches and misdemeanours. The banking industry as a whole had paid more than US$345 billion by then, according to Deloitte. No wonder Deloitte also found that compliance expenditure by banks had risen by 60 per cent since the financial crisis, and was still rising.
Regulations are not static, of course. Deloitte reports an average of 220 regulatory revisions a day, so keeping up with the changes alone is an onerous task for regulated firms, especially if they are operating in multiple jurisdictions, each with its different rules.
Bain & Co estimates that compliance accounts for 15-20 per cent of the total “run the bank” (as opposed to “change the bank”) cost base of major banks. In fact, compliance costs are now so high that they have become a major factor in investment decisions, capable on their own of dipping a return below the corporate RoI threshold.
Providers of new services, such as open banking, have sold themselves partly by promising greater efficiency in compliance checks, especially in customer on-boarding, so making consumers happier as well as lifting returns. The old saw, familiar from outsourcing, which holds that RegTech frees employees up to do something more productive, has traction with regulated firms for the same reason.
Regulators have fretted that it will be impossible for them to keep pace with the new instruments spawned by digital technology without using more digitised data and processing power to keep up, especially since they were themselves demanding ever more information from regulated firms. A new breed of infrastructure – the trade repository – emerged to house it.
The General Data Protection Regulation (GDPR) of the European Union (EU) captured the spirit of the new age of building regulation into day-to-day business decisions, let alone investment decisions, by promising rewards to regulated firms that achieved compliance with its provisions “by design.”
New technologies such as artificial intelligence (AI) and machine learning (NML) have promised to automate the reading of documents and other data-driven compliance checks in a way that reduces errors, accelerates response times and increases operational efficiency. Blockchain enthusiasts have even envisaged putting regulators on to peer-to-peer networks so they can monitor activity directly.
In reality, old-fashioned software-as-a-service (SaaS) from the Cloud plus application programme interfaces (APIs) to facilitate data exchanges have proved equally effective as enablers of regulatory automation. They can, for example, populate a regulatory report for checking prior to delivery to a trade repository.
RegTech is maturing. It is finding useful applications and starting to consolidate. Yet it continues to resist tidy definition. Deloitte divides a current total of 412 RegTech firms it monitors into five high level categories - Compliance, Risk Management, Identity Management and Control, Regulatory Reporting and Transaction Monitoring – which help to make sense of a broad range of activities.
But even within the five categories can be found law and regulation monitoring, risk management, regulatory reporting, cyber and data security, fraud prevention, Know Your Client (KYC), Anti Money Laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions screening checks, tax compliance, trade monitoring and a host of other areas – including market surveillance, which is now becoming the separate discipline of SupTech.
So the first task of Future of Finance is to help to draw a useful map of the large and evolving RegTech universe. That map needs to be one which is capable of being individualised to the needs of different firms, so they can more easily identify those applications that can make a material difference to their own regulatory compliance costs and risks.
Which is why this Future of Finance webinar will launch a series of events on RegTech, including case study presentations by RegTech firms that have had a measurable impact on the regulatory compliance costs and risks at specific banks, asset managers, insurers, transfer agents, fund administrators, wealth managers and others.
Topics for discussion include:
1. How can the RegTech universe best be mapped – as a single set of related disciplines or a set of unrelated disciplines, or as something else?
2. How much of RegTech is a case of technology searching for problems to solve and how much is genuinely meeting the needs of regulated firms?
3. How easy is it to distinguish between the Regulation and the Technology in RegTech?
4. Are financial services firms structured and organised, especially in terms of their technological systems and infrastructure and workflows, in ways that enable them to exploit RegTech innovations?
5. Is RegTech more about understanding processes than applying technology?
6. What do regulators make of RegTech?
7. Which technologies – Cloud, APIs, blockchain, AI and ML, data mining and analytics, smart contracts – are having the most impact in automating compliance?
8. Is there a case for RegTechs to agree a set of data standards – or would it make more sense for regulated firms to do so?
9. Can regulatory compliance be reduced to a problem of (a) better controls and/or (b) better data management and processing?
10. Are regulations programmable (i. e. can unstructured text be turned into executable instructions)?
Adam Csabay SupTech Lead at FNA https://www.linkedin.com/in/adam-csabay-202480157/
Sally Sfeir-Tait CEO at Regulaition https://www.linkedin.com/in/sally-sfeir-tait/
Rupert Brown CTO at Evidology Systems Ltd https://www.linkedin.com/in/brownrupert/
Moderated by Dominic Hobson Co-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222...
If you would like to participate as a panellist please contact Wendy Gallagher at firstname.lastname@example.org
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