Reg Techie

Smith believes regtech companies like hers provide a less trumpeted but equally important benefit to the industry: trust-building.

“Customer expectation is growing in reaction to what has gone on in the past. People are going to expect far more transparency in their financial dealings with companies. There will come a point where people will expect to have a copy of the conversation they’ve had, and we can do that.”

The pace of change and the bewildering amount of regulation globally is only going to increase. There are 90 regulators worldwide issuing more and more rules, presenting businesses with new challenges on a regular basis.

“The regulatory landscape is changing all the time,” says Anderson. “In the US it’s slowing down, here we’ve just had GDPR, then there’s a lot of complexity on a geopolitical level, and around the corner with Brexit. If you look at a major bank that’s trading in the UK and the EU, there’s a presumed layer of complexity that we might need to adhere to dual or parallel regulation.”

https://www.theguardian.com/legal-horizons/2018/nov/15/the-regtech-boom-how-the-financial-crash-spawned-a-new-industry-in-the-city

Datarama is also part of the global RegTech 100 for the second year running.

Singapore regtech platform Datarama won the RegTech Award for Best Anti-Money Laundering Solution at the Regulation Asia Awards.

The announcement comes as Datarama was also named in the global RegTech 100 for the second year in a row, an annual list of 100 of the world’s most innovative RegTech companies.

“Datarama was the winner for its technology-enabled interactive mapping and cross-checking tool, which gathers data from specialised media, deep web sources and official records to visualise key relationships, unearth obscure information and highlight hidden associations, thereby helping firms to fast-track KYC, due diligence and deal identification,” Regulation Asia’s Award announcement said.

The award recognises firms that are playing a leading role in developing emerging technologies to meet regulatory requirements.

“We developed our regtech platform with the objective to leverage big data and technology to revolutionise the compliance and due diligence space. These awards are a recognition of our achievement in making due diligence and compliance in cheaper, faster and more efficient,” commented Raphael Bouzy, CEO & co-founder, Datarama.

Datarama was recently chosen by Oracle to share its expertise on regtech as part of last week’s Singapore Fintech Festival, the world’s largest FinTech event. Over 30,000 delegates attended the event organised by The Monetary Authority of Singapore (MAS) in partnership with The Association of Banks in Singapore.

The RegTech Association (RTA) has announced the appointment of a new CEO and two board members: leading advocacy expert, Deborah Young as CEO; Commonwealth Bank’s (CBA) Head of Governance & Assurance, Jasper Poos as Director and serial RegTech entrepreneur, Harold Lucero as Director.

The RTA brings regulators and regulated entities together to improve efficiency, productivity and safety of business and financial systems - through the adoption of RegTech. These three new appointments will help the RTA deliver on its mission of building higher performing, ethical and compliant businesses through RegTech innovation and investment.

Commenting on the three appointments RTA Chairman, Julian Fenwick said: “We are very pleased to announce these new appointments. We are cognisant of the need to ensure that our board has representation from both RegTechs and Regulated entities, and these new board members provide just that. Our new CEO and board appointments bring together a range of balanced perspectives to help the association accelerate the adoption of RegTech in Australia.”

Deborah Young brings over 20 years of financial services advocacy experience and assumes the role of CEO from her previous position as the General Manager of the RTA. She has a track record in building industry engagement programs from the ground up, including accreditation programs, Environmental Social and Governance (ESG) and diversity initiatives in venture capital/private equity, insurance and superannuation.

Deborah Young said: “It is an honour to be confirmed as the RegTech Association’s first CEO. The growth and awareness of the association’s work continues to build, and I am very excited to be able to lead in the implementation of the next phase of the strategy. We have already begun the roll out of our RegTech AML Boot Camps which underline our values to educate, connect and collaborate. I’d like to thank the board for this opportunity and look forward to working with all members in pursuing our goals.”

RTA Chairman, Julian Fenwick added, “It is especially pleasing to announce Deborah Young as the RegTech Association’s first CEO. Deborah’s passion and expertise in mobilising and operationalising industry-wide impact initiatives made her the clear and logical choice to take the association forward through its next phase. We are excited to work with Deborah and look forward to having her leadership in driving the organisation into the future."

Jasper Poos brings a wealth of global compliance experience both from the regulated entity and regulator perspective. He has been involved in the RegTech Association in an advisory capacity since its foundation in 2017. He is currently Head of Governance and Assurance for CBA in a role that covers operational risk and compliance across the bank’s institutional banking and markets business.

Global professional services firm, PwC has acquired KYC-Pro, a regtech solution, from boutique financial services compliance firm, FSCom Limited, for an undisclosed amount.

The move comes as part of PwC’s plans to bolster and expand its regulatory compliance offering. Research shows that by 2020, European banks will spend more than EUR1 billion annually on their KYC management.

KYC-Pro enables customers to access to over 127 million companies worldwide, conduct individual AML checks across more than 20 countries, and cross reference potential customers against international PEPs and Sanctions lists. It also boasts meticulously designed APIs and a user-friendly dashboard which improve the customer experience.

Unlike most RegTech solutions, KYC-Pro has been developed by compliance experts. Combining FSCom’s deep knowledge of financial services regulation with the best databases and intuitive technology, KYC-Pro ensures customers meet their regulatory requirements in the most effective way possible.

FSCom has developed a reputation for delivering unrivalled compliance advisory services to financial services companies across the UK and Ireland, particularly those operating in the payment services and e-money sector.

Regulatory technology has the potential to continually monitor transactional activity and persons, provide close to real-time insights and raise red flags, and identify aberrations that human beings with their better sense of intuition can then use to follow up. Automated analysis plus human judgment can help a regulated business get a clearer picture of risks facing them and recalibrate immediately — rather than simply taking the remedial action after the enforcement occurs.

Firms should have detection controls in place that alert the compliance department when certain types of trades are being executed, or even better (especially for certain types of trades and for certain traders under heightened supervision), that prevent certain trades from occurring, period.

Prevention is critical, and another key method is through education. Regular training — a form of regtech in itself — should refer to the possible consequences of trading techniques that favor certain investors and fraudulently manipulate outcomes for the firm and for employees themselves, which can be persuasive.

Any brokers that firms believe to be higher risk should be placed into an effective heightened supervision plan, including more frequent contact with the broker, more frequent review of the broker’s communications with customers, and more frequent monitoring or inspection of the broker’s branch office. The same goes for risky clients and vendors, if they are even on-boarded at all.

It is imperative that the firm document all of these heightened review measures.

https://www.reuters.com/article/bc-finreg-regtech-challenges/finras-regtech-report-shows-uses-and-challenges-of-new-technology-idUSKCN1M72F8

A real look inside a bank's compliance office?

The point of regulation is to help protect society from the excesses of the free market. But when done badly, it can be burdensome, create perverse incentives and stifle innovation. Given that the advantages for the economy of having a clean and efficient regulatory environment are manifold, it is unsurprising yet reassuring that the FCA has been increasingly interested in regtech.

‘We started our work three years ago. There was this regtech term being bounded around, but when we first got involved in the market we didn't really know what it meant,’ says Nick Cook, the FCA's Head of RegTech & Advanced Analytics.

He says that now the regulator tries to play three key roles within the developing regtech sector.

The first is as a vocal participant in the market, publishing calls for input and meeting with companies and accelerator programmes to work out the ways in which the technology can be used to meet the needs of regulated firms - this involved a call for input from industry stakeholders in 2015.

The second role is as ‘a convener of new solutions’ through the hosting of tech sprints and sandboxes.

Finally the FCA is an ambassador of regtech through experimentation, research and development of its own. The regulator is piloting a series of tests to develop ‘machine executional reporting’ – in layman’s terms, writing law as code - and also looking at how machine learning technology and natural language processing technology can be implemented in the regulatory process.

'It's pretty fair to say that we, like pretty much every other regulator in the world, are still at an early phase of building this out,’ admits Cook. ‘A lot of it is still in labs and the experimental phase, but we see a myriad of potential use cases.’

This innovative attitude has had huge benefits for the UK’s place in global regtech space.

IdentityMind Global has announced the launch of its IdentityMind Webstore, an online RegTech marketplace that enables firms to integrate regulatory compliance functions directly into their solutions.

The Webstore is self-serve, allowing customers to select a “plugin,” test out a free demo and prepay with a credit card (virtual currencies and other payment methods will soon be available). The store’s plugins are easily customizable, all-inclusive RegTech solutions covering the key anti-money laundering functions (AML): know your customer (KYC), sanctions screening and transaction monitoring.

“In an industry first (demonstrating how IdentityMind continues to drive product and industry innovation), we’re excited to announce that the IdentityMind Webstore is open for business,” said Jose Caldera, chief products officer of IdentityMind, in a press release. “The IdentityMind Webstore is the perfect channel for small and medium-sized [FinTech firms], marketplaces, virtual currency exchanges, small lenders and person-to-person payment (P2P) firms to enhance their platforms.”

The IdentityMind Webstore gives small and medium-sized organizations access to necessary compliance functions that are otherwise expensive and difficult for them to implement.

The transition to cloud-based compliance is a crucial precursor to other Regtech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilize the advanced technologies required to meet future compliance challenges.

A new study from Juniper Research has found that spending on Regtech platforms will exceed US$115 billion by 2023, up from an estimated US$18 billion in 2018. The research found that increased regulatory pressures, as demonstrated by the recent GDPR (General Data Protection Regulation) implementation, are driving businesses towards Regtech to meet greater compliance challenges.

According to the research, any heavily regulated business sector not prioritizing Regtech adoption would risk damaging fines from failing to keep pace with regulatory changes.

The report also highlighted that the sharp increase in Regtech spending (an average of 45% per annum between 2018 and 2023) was far higher than that for compliance spend as a whole (17%), reflecting the rapid migration of spend to Regtech from traditional methods.

The research, Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023, found that KYC checks for anti-money laundering are ripe for disruption by AI systems, due to the inefficiency of traditional, paper-based systems.

Juniper forecasts that across banking and property sales, annual gross cost savings from AI introduction for KYC will exceed $700 million by 2023, a nine-fold increase over 2018.

“AI-powered ID solutions are uniquely suited to reducing the resources needed to verify identity. By integrating the correct KYC tools into cloud-based systems, financial institutions can dramatically reduce their compliance burden,” said Research author Nick Maynard.

The Financial Industry Regulatory Authority issued a white page discussing regulatory technology developments in the securities industry, and possible benefits and implications of these developments. Among other things, FINRA noted that regtech developments have significantly impacted firms’ surveillance and monitoring activities and potentially will allow a greater volume and variety of information to be “readily” analyzed. Additionally, regtech startups and incumbents are introducing solutions to enhance customer identification for know-your-customer purposes. These developments could help members’ compliance and anti-money laundering activities. However, FINRA cautioned that the use of enhanced systems could have implications for firms’ supervisory control systems, outsourcing oversight, security, and customer data privacy. FINRA will accept comments on topics raised in its white paper through November 30.

A January 2018 study by the Boston Consulting Group on global regtech clusters found that the region has 70 firms currently working in the area, of which 39% are in Australia and 37% in Singapore. It places Australia behind global leaders the US, UK, and Switzerland in early development.

In Australia, the Government and its agencies are already on board, and corporate regulator ASIC recently secured an additional AUD 6 million in funding to market Australia as a regtech center.

ASIC established a liaison group to the regtech industry, and Chairman James Shipton went public in backing regtech.

He sees it as a key area that the financial community can leverage to claw back much of the public trust which has been eroded by many of the unethical practices now being exposed by a Royal Commission into banking.

Shipton’s perspective is that appropriate use of regtech can help financial providers identify breaches faster, report them to regulators quicker and act on them.

A recent ASIC’s breach report showed that it takes more than four years – or 1,517 days – to identify a problem by an Australian bank. Then it takes another 28 days for an investigation to begin, another 128 days before a breach notice is lodged with ASIC, and then another 226 days before customers can receive any remediation payments they are owed.

Young said support from Australian regulators is critical in developing a local industry and describes them as “very engaged.”

“They have a very open door, and have come a long way,” Young said.

“AUSTRAC (the Government agency which monitors financial transactions), recently held a regtech showcase which was very well attended, and they made it clear that they want people to come and knock on their door. They want startup and other firms to come and show them what they have got so they can give them feedback, and this is a very encouraging sign,” she added.

Apiax, a Swiss regtech company, has launched a new tax product that allows banks and asset managers to factor the tax impact of financial instruments into their investment recommendations, addressing key challenges in wealth management, such as the need to increase the quality and frequency of client interactions and the rising demand for tailored investment advice.

Ralf Huber, Co-Founder Apiax

“Together with our content partners, we’ve found a way to digitalize tax regulations on the ISIN- level so we know on the level of the financial instrument how it will be taxed in all possible scenarios,” Ralf Huber, co-founder and legal lead of Apiax, told Fintechnews. “Once you have all these variables factored into a regulatory rule set, you can extract tax information from it. More importantly, you can calculate the tax impact of financial instruments and of entire portfolios. We think that’s pretty exciting.”

The solution allows financial institutions to make use of tax calculations in their advisory processes, “the missing piece in the puzzle of value-added, personalized investment advice,” the company said in a blog post. Using the new tool, financial service providers can inform clients about tax-heavy financial instruments and offer them tax-efficient investment recommendations instead, enabling for tailored investment advice as well as new investment products and investment services.

The transition to cloud-based compliance is a crucial precursor to other Regtech approaches, such as AI or Big Data. Unless businesses effectively plan the correct cloud deployments, they will struggle to utilize the advanced technologies required to meet future compliance challenges.

A new study from Juniper Research has found that spending on Regtech platforms will exceed US$115 billion by 2023, up from an estimated US$18 billion in 2018. The research found that increased regulatory pressures, as demonstrated by the recent GDPR (General Data Protection Regulation) implementation, are driving businesses towards Regtech to meet greater compliance challenges.

According to the research, any heavily regulated business sector not prioritizing Regtech adoption would risk damaging fines from failing to keep pace with regulatory changes.

The report also highlighted that the sharp increase in Regtech spending (an average of 45% per annum between 2018 and 2023) was far higher than that for compliance spend as a whole (17%), reflecting the rapid migration of spend to Regtech from traditional methods.

The research, Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023, found that KYC checks for anti-money laundering are ripe for disruption by AI systems, due to the inefficiency of traditional, paper-based systems.

Bank of Lithuania announced on Tuesday the launch of its new regtech feature specifically for e-licensing. The feature reportedly makes submission of information necessary to obtain an operating license quicker, easier and less expensive.

“Currently the tool facilitates the process of applying for e-money and payment institution licenses and new enhancements for applications of other license types are under way. The solution should eventually become the main platform for information sharing and cooperation between the Bank of Lithuania and financial market participants.”

While sharing more details about the feature, Vytautas Valvonis, Director of the Supervision Service at the Bank of Lithuania, stated:

“Aiming to create an innovation-friendly, attractive and competitive environment for financial sector regulation, we were among the first in the EU to introduce a RegTech system for submitting applications for operating licenses. We hope that it will further accelerate the authorization process and ease the administrative burden for potential financial market participants.”

Valvonis also reported that given the fast expansion of the financial sector spurred by new market entrants, such as fintech businesses, the number of applications for licenses has increased markedly over the last few years. Seeking to speed up standard procedures and ensure efficient use of supervisory resources, at the same time maintaining the high level of transparency requirements, the Bank of Lithuania is actively implementing various electronic tools, including regtech solutions.

Epperson said the biggest gap is in basic processes. There’s the potential to automate simple workflows and decision-making processes, and doing so could free up organizations to focus on addressing other pieces of the regulatory challenge.

But perhaps even more challenging, he said, is the need for a cultural shift within the space. Innovation of products and services is happening faster than ever before, meaning that organizations must also move more nimbly – and that requires them to think differently about meeting the requirements.

Epperson noted that teams must become multi-disciplinary. Risk and compliance teams should not be the last ones to see what the organization is working on, but should be at the table from the beginning. And there should be a dedicated team ready to address new issues as they arise, which he said makes the organization nimbler.

In short, more than technology is needed to solve this complex and ever-growing challenge.

“The technologies are great,” said Epperson, “but something must change to take advantage of RegTech. Strategy, culture, organization and process can be some of the most stifling factors. You need a collaboratively defined strategy that includes business, risk, compliance and regulatory channels.”

Drawing the Roadmap

Before introducing RegTech, Epperson said organizations must realize they can’t just flip a switch. They must sunset their existing applications and transform into a new one. Dependencies, project management, communication and coordination will all be factors. Thus, a coordinated roadmap is necessary – indeed, Epperson said, it’s the most important function of any RegTech investment.

To draw the roadmap, organizations must first consider the capabilities available to them and the outcomes they hope to achieve – again, thinking beyond just checking off the regulatory and compliance boxes. They must align their specific needs with the available features and the organization’s overall strategy.

Consider, for instance, how RegTech can help to drive customer experience or reduce friction. It could potentially create a competitive advantage, enabling the organization to serve a new market or provide new products and services, either today or tomorrow, that will give it an edge.

Finally, through it all, Epperson said organizations must bear in mind that it’s not just about solving their business issues – they will also have to sell their decisions to regulators, providing more significant justification and documentation than would otherwise be needed.

Eventus Systems, Inc., a provider of innovative regtech software solutions for the capital markets, has just launched a new, enhanced website, www.eventussystems.com. The site features a deep dive into the firm's capabilities and market-specific features that have attracted clients to Validus, the company's premier solution for comprehensive surveillance and trading risk management.

Eventus CEO Travis Schwab said: "We're excited to introduce our new site and to provide a more complete view of the range of services, markets served and functionality we deliver. We have grown dramatically in the past two years, and this dynamic new site showcases our increased market penetration, strength across asset classes and depth of product."

Designed by financial services marketing agency Gate 39 Media, the new website highlights the capabilities of Validus, available as an on-premise enterprise or cloud-based solution. Among the features are sophisticated alerting and visualization; a suite of tools for advanced reporting; delivery of reconciled, multi-party counterparty data; monitoring of key trading functions; and the ability to scale the platform across asset classes and connect into existing systems to meet client needs. The site provides examples of more than 150 unique pre-built procedures clients can use for compliance, surveillance and risk management.

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.

Data aggregation

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.

Record keeping

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.

Analytics

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.

Document management

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

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.

Securrency, a regtech firm that has created platform designed to streamline regulatory compliance for token offerings, announced on Friday it has formed a strategic partnership with SharesPost, a provider of private company liquidity solutions and private capital markets research, to help drive tokenized securities trading to the SharesPost platform by providing liquidity through SharesPost’s Alternative Trading Platform (ATS). While sharing more details about the partnership, Dan Doney, CEO of Securrency, stated:

“Enabling the issuance of securitized tokens can be complex, especially when it comes to maintaining compliance with regulations in multiple jurisdictions. We’re thrilled to be working together with the innovative team at SharesPost’s Alternative Trading Platform as our technologies deliver essential security and compliance features to support primary offerings and secondary-market trading of tokenized securities across SharesPost’s impressive range of services.”

Securrency reported that the latest partnership continues its “network effect” strategy of partnering with other companies and financial services providers to deliver best-in-breed security and compliance. It was reported: