20 September 2017
John Bertrand


John Bertrand - SAP

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Digital Compliance, only superheroes need apply

15 June 2016  |  5994 views  |  0

Compliance is big business. The four big UK banks have paid out $75 billion in penalties by August 2015 and 20 global banks paying out $235 billion since the financial crash. 

Compliance officers are in great demand and the scope of a digital compliance manager demanded by a major bank would give Superman that difficult moment of being selected.  The requested responsibilities and capabilities are so significant to be able to perform the function.  Why is digital compliance so hard that we have to call for superheroes? 

Given banking worldwide is going digital, compliance itself should also go digital. Having  compliance built in into the technology could be the next generation of banking.  Although having a layer of digital technology across the enterprise operating in near real time could be the short-term answer.

So let’s make digital technology the superhero.

This is certain to continue as: Basel IV is looking like global regulation and the UK Financial Conduct Authority (FCA) is focusing on ‘enforcement division supports our objectives by making it clear there are real and meaningful consequences for firms or individuals who don’t follow the rules.’ 

To compete against the compliance business, supervision becomes key. 

Two new regulations, the Senior Management Regime and the EU Market Abuse Reporting, effective July and in the UK monitored by the FCA will test the current governance. By bringing in digital technology, the supervisor would know seconds after a trade that it is very different from the norm, (an anomaly).

Prior to the trade, digital technology has coupled into the human resource system. The data shows the traders past behavior against the house rules and regulations. In addition, predictive analytics show where the trader is moving to along the risk to misbehavior scale.   

By having digital compliance covering the market, the trader’s actions and the bank’s policy, the probability of non-compliant is dramatically reduced. The profile of every anomaly can be seen by management and if necessary shown to the authorities. 

Each anomaly has a sequence of events, digital fingerprints if you like. By reconstructing these events in a time lineage a full picture appears. Today with digital compliance this can be rapidly analyzed and comprehended.

Digital compliance introduces speed needed to forestall malicious behavior. By combining bank, market sources and social data the digital technology can highlight areas of vulnerabilities, hot spots, if you like. These hot spots can be checked out prior to and post the trade. 

There could well be a second set of digital screens, which visualizes certain aspects of the market for automated supervision. That is certain rules and levels of exposure are built into the digital technology and once breached trigger alerts. These alerts can be texts, emails to the management team for immediate action.

Like any superhero, the supervisor must address most pressing regulation first. Digital technology allows you to act fast, faster than a speeding bullet. So focus in on the most pressing business issue and complete it quickly. Once done, repeat and after awhile you’ll have a level of compliance that will become penalty proof.

The digital compliance, built in stages, can become a liaison between the stakeholders in the business. This could also include the official regulators.  A progress and on-going digital compliance will not only install a permanent digital superhero, it could also prevent prison for those named as ‘Persons Discharging Managerial Responsibilities’ even though the CEO looks good in stripes.



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