Regtech's Rise: Applying Tech And Compliance Functions For Tomorrow

Lee Bosio, 22 July 2021


COVID-19 – a watershed moment for digitisation  
COVID-19 may be a watershed moment for digitisation, causing a greater shift to digital channels as customers accept and embrace a new normal. Whether businesses are considering ramping up remote onboarding to meet new demand or are moving existing services online, applying smart processes now will pay dividends when the pandemic is over, enabling businesses to remain competitive as we enter a new age of remote working.  

The Financial Action Task Force (‘FATF’) says the impact of the COVID-19 pandemic, the resilience of national AML/CFT regimes and the risks faced by the private sector all vary significantly from country to country. The FATF has been highlighting the fact for some time that it is illogical to rely solely on an online rating system to measure the accuracy of a risk assessment when onboarding a client. The methodology used to assess all major risk elements needs to consider the jurisdiction(s) in which a company operates; therefore, finding a regtech solution that fully captures and considers global jurisdictional nuances in a timely and auditable manner is paramount to reducing risk. It strengthens the fact that regtech will become much more important and central to business operations.

Evolving and enhancing the compliance function of the future 
Compliance teams have an array of tools available to them today which their predecessors could only have imagined. However, managing the regulatory compliance function for a financial services firm is arguably more difficult today than ever before, despite the increase in available technology solutions. Mostly, this is due to the underlying regulations that are increasingly complex, nuanced and ever changing. Risks, too, are evolving with developing technology. As firms adopt more regulatory processes, it is important that they update and refresh their review processes and supervisory procedures to stay current. 

Not only is regtech altering the way in which businesses onboard, identify and monitor clients, it is also changing how some compliance teams are hiring their staff, from whom they require specific skillsets and adaptability. Technology-enabled compliance teams find that technology is a differentiating factor when it comes to attracting new recruits and retaining experienced staff as evolving technology enables teams to enhance processes and controls – increasing productivity.
Human interaction in compliance will always be needed; it is unllikely that technology will ever erase that, but technology is only as good as the people using it. PWC conducted a recent report on the deployment of regtech solutions within financial services businesses. The firm identified that new technology employed in other areas of a business is also influencing how compliance teams hire staff. Given the sheer amount of data that needs to be reviewed under the ever-advancing and changing compliance process, which would require hundreds if not thousands of human resources if completed by human headcount, it is forcing compliance departments to consider hiring data and technology experts to deploy and oversee regtech as part of the compliance function and to ensure a smooth rollout. Finding the sweet spot of technology skills and the ability to interpret and advise on data will fast become increasingly valuable components for a strategic compliance team. 

Compliance functions need to continually evolve to be more industry-driven, while also becoming more proactive and able to produce results in real-time. Successful firms will be nimble, flexible, and able to quickly implement cutting-edge technology that leverages data analytics, AI and distributed ledger technology to continue to have an advantage in an increasingly competitive field. 

Demonstrating a willingness to adopt new ways of working and give up the old, can often seem daunting for people who need to change historic ways of working. However, as with any new challenge, the work invested now will pay dividends in the future resulting in a more efficient organisation which will have a better chance of scaling and adjusting as the business changes and adapts to the fast pace of this new world. 

In our experience, it is technology that helps a business shorten the time between the client need and its being fulfilled – when it comes to technology there is no better example of this than regtech and client onboarding.



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