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The Rubik's cube of APAC regulation

AML. Dodd-Frank. OTC Derivatives reform. The Volcker rule. Basel IV. FATCA. GATCA. The list goes on but the introduction of new local and global regulations shows no signs of abating. Against this backdrop, financial institutions in APAC must ensure that they are promptly informed of evolving regulatory obligations. But an understanding of these requirements is just the beginning of a wide range of resource-intensive activities that financial institutions in APAC are undertaking to break free of the regulatory shackles.

Faced with spiraling costs, and myriad complex rules and regulations of a supranational nature, financial institutions in APAC are now asking the question –

Is it sustainable to design point solutions to meet financial institutions regulatory compliance needs? 
Increasingly the answer to this question is ‘No’.

Regulatory compliance is a huge cost burden on financial institutions and achieving synergies by grouping relevant initiatives under the same programme is one way to alleviate these costs. FATCA and AML/KYC (anti-money laundering / know your customer) are prime examples of discrete regulations impacting the same business processes (in this case, onboarding) and many financial institutions are tackling the two issues concurrently for greater efficiency.

But how can financial institutions attain a holistic view of all regulatory requirements across jurisdictions to identify opportunities for synergy and optimize resources deployment? And to demonstrate compliance with multiple regulators?
Cost is not the only consideration for financial institutions. Banks must be cognizant of real and potential conflicts in laws and regulations between jurisdictions – an issue brought into sharp focus by the collision between efforts to reform the global OTC derivatives market and local data privacy constraints. Such contradictions as well as ambiguities in requirements across different regulatory regimes on the same topics make it tremendously challenging for financial institutions to ‘build it once and build it right’. But visibility of these issues is the first step towards achieving that goal. As a result, the implementation of a Regulatory PMO function to capture and oversee regulations across jurisdictions seems inevitable for financial institutions.

Can regulatory-driven initiatives be aligned with the long-term business model?
Financial institutions face steep challenges when handling the increasing volume and complexity of regulatory requirements. An in-depth and consolidated view of regulatory obligations and a structured enterprise-wide mechanism to address them offers the potential to not only meet immediate compliance needs, but also achieve broader business benefits.

Can the implementation of IT solutions fulfil technology infrastructure needs and meet compliance requirements? 
While solutions to meet compliance requirements are often technology agnostic, there may be conflict between IT solutions for technology infrastructure versus compliance. However, such conflicts are generally limited to prescriptive compliance, rather than interpretive compliance. Since most new regulations are more interpretive than prescriptive, there is a good opportunity to align technology implementation with compliance.

 

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