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Regulatory Compliance powered by RegTech

Complying with regulations is an increasingly complex, cross-functional effort. Policy makers, regulators and shareholders are looking for firms to meet both existing and future regulatory requirements. RegTech solutions allow institutions to improve effectiveness and regulatory productivity notably. RegTech can change “cost of compliance” from a stand-alone cost to a business enabling cost.

RegTech has rapidly risen to prominence in 2015 and there is a good reason why: RegTech is saving firms a significant amount of money in regulatory fines and is displacing manual risk and compliance with cutting-edge technology.

RegTech collectively refers to companies that are harnessing emerging technologies to help institutions improve compliance. As per the Financial Conduct Authority (FCA), RegTech applies to new technologies developed to help overcome regulatory challenges in financial services. We have observed that RegTech companies were born out of a combination of increased regulatory change and emerging technology.

The advent of emerging technologies such as advanced analytics, Robotic Process Automation (RPA), cognitive computing and cloud is enabling the creation of a differentiated regulatory technology (RegTech) solution.

Technology has been used to address regulatory requirements for some time, but what is new and exciting about RegTech? Here are some of the key characteristics of Reg Tech:

Agility – Cluttered and intertwined data sets can be de-coupled and organised through ETL (Extract, Transform, Load) technologies.

Speed – Reports are quickly configured and generated.

Integration – Short time frames to get the solutions up and running.

Analytics – A recent Deloitte report quoted biologist Edward Wilson; “We are drowning in information, while starving for wisdom”. RegTech uses analytic tools to intelligently mine existing “big data” data sets and unlock their true potential, e.g. use of the same data for multiple purposes.

The key difference between traditional solutions versus the RegTech era solutions is agility.

Many RegTech providers use agility and are exploring how advanced analytics and assessment techniques can start to ‘learn’ and support in accelerating the assessment of new and emerging regulation based on historic data. In the same way neural networks have helped predict fraud or customer behaviour.

Areas where we have seen it performing well include heavily quant-based obligations, information based obligations and risk identification and management tools, including:

  • Legislation/regulation gap analysis tools
  • Compliance universe tools
  • Health check tools
  • Management information tools
  • Transaction reporting tools
  • Regulatory reporting tools
  • Activity monitoring tools
  • Training tools
  • Risk data warehouses.
  • Case management tools.

RegTech firms approach the solution from a technology solution-oriented approach rather than a strategic approach centred around key regulatory needs.

It is critical to FSIs to solve their compliance challenges by identifying the most impactful areas for transformation, applying the right solution (and provider) and overcoming other factors that hinder effective adoption of technology.

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