Compliance professionals face an ever-greater range of obligations. While regulators do not deliberately go out of their way to devise “tick-box” regulations, the reality is that the raft of new rules established over the last decade has resulted in a lot
of forms to fill and boxes to tick. This means a lot of effort is expended on work that is manual, administrative and often repetitive.
Technology that helps compliance professionals introduce some level of process automation can therefore reap significant savings. Whether it relates to monitoring employees’ trading activities, providing pre-clearance for proposed trades or managing the
documentation to file attestations, RegTech applications do not need to be over-engineered to have a meaningful impact.
Without singling out any specific solutions, we highlight five key processes that RegTech needs to address in order to offer the most bang for its buck.
Many modern compliance tasks require aggregating data from multiple sources. The ability to aggregate and normalize data is vital when you are integrating employee trading details from their retail brokerage accounts, aggregating the firm’s transaction information
from multiple trading systems, or consolidating electronic communications for record keeping and reconstruction purposes. Rather than reinvent the wheel, this is one area where it makes sense to partner with specialist firms.
Keeping records is crucial to regulatory compliance. Whether you are talking about recording communications or transactions – firms will typically need to make use of a range of technologies to suit specific requirements. Technologies such as WORM (write
once read many) drives, cloud infrastructure or NoSQL / Big data or even distributed ledger technologies can all be beneficial depending on the specific use case.
As record keeping capabilities have evolved, so too has our ability to analyze those records. Compliance analytics do not need to be extremely sophisticated to be effective. The simple ability to detect trends, patterns or correlate events can be a significant
aid to productivity. This is one field in which machine learning is making significant inroads. By training algorithms to detect patterns and relationships, compliance officers can leverage the enormous processing horsepower from modern IT systems to tackle
some of their highest scale challenges. However, those high scale challenges more often tend to be on the sell-side. As an example, the FCA recently urged banks to begin investigating how to use AI to improve detection of suspicious transactions for AML purposes.
Managing documentation is a key function for compliance officers. The administrative aspects of the job can be some of the most burdensome, so firms can generate significant efficiencies by getting it right. Good document management means more than storing
and retrieving documents electronically. It also needs to include workflow management – providing users with notifications and reminders, enabling them to complete and sign forms online, as well as enabling electronic submission to regulators and recording
all interactions for a full audit trail.
Reporting is a function that ties together many of those already mentioned. Being able to aggregate data from various sources, store and analyze that data, and track progress in filings and attestations are all vital capabilities essential to supporting
a healthy reporting function. Perhaps most importantly, reports need to be customized to their audience. Whether that be internal management or external regulators, each will have specific requirements relating to what they would like to see and in which format.
Don’t Get Carried Away with the Hype
Much of the current hype surrounding IT relates to fields like artificial intelligence and robotics. One can hardly blame the media for being captivated by these areas. These are technologies that stoke our sense of wonder, as we entertain the possibility
that the science fiction of the past may be approaching present-day reality.
Yet in truth, today’s RegTech landscape tends to be somewhat less glamorous. The dawn of the fully autonomous robo-compliance officer is not on the immediate horizon. But that does not make technology any less impactful. In fact, applications that do the
simple things well tend to yield a much more rapid return on investment than bleeding edge technologies that over-promise and under-deliver.