Regulatory Intelligence: How Regtech Changes Compliance Amidst the Crisis
Armada Labs breaks down compliance challenges conditioned by COVID-19 and solutions Regtech can bring to these post-pandemic.
The financial crash of 2008 forever changed the situation with compliance. All of a sudden, we saw an enormous amount of regulatory changes coming through and increased scrutiny from regulators along with increased fines. As a result, financial services firms reacted by investing more in compliance than before — resources, personnel, and, of course, money. Consequently, the amount of work in the compliance sector increased.
Going back to the present days, we see that compliance investments have been showing the signs of scaling back in recent years (at least, they seemed to). And that despite the apparent regulatory change and that fines remain all-time high. For now, compliance is expected to bring more effect with fewer resources at hand.
If we look at the current climate, the pandemic caused even more occasions with financial fraud and consequently heightened regulators’ focus on financial crime, cybersecurity, privacy, and business continuity. New regulations appear.
The Pitfalls of Regulatory Solutions in Today’s Climate
Data Errors
Most legacy compliance solutions weren’t designed to manage the complexity of “post-financial-crash” regulations and traditional content providers because of obsolete technologies. They can’t convert regulatory content that you access on a regulated website or the web to convert it into regulatory intelligence. The results are erroneous and even duplicated.
But the biggest problem with legacy solutions is overwhelming compliance and business and policy control of data that isn’t delivered with a sufficient level of granularity. This means that compliance and business owners have to deal with a lot of unnecessary noise to determine each law’s applicability.
Outsourced Mapping
Regulatory mapping relates to the process of researching and identifying laws and regulations specific to the industry, products, and the country of operation.
Mapping regulations to a firm’s internal structure is time-consuming and labor-intensive with legacy systems. As a result, these activities are often outsourced to legal and consulting firms, which comes at a massive cost.
Regulatory Gaps
Legacy content providers and solutions have rarely been able to present a fully comprehensive inventory of regulations. In turn, companies were exposed to regulators. Across the globe, the key financial services regulators ask firms to evidence that they have a full understanding of complete regulatory obligations, all applicable laws and regulations that apply to their businesses. If you are a “tier-one” global bank operating with multiple jurisdictions, there’s a lot for you to do.
With legacy solutions at hand, you can try to “fill the gaps” with different solution providers, contact law firms, or hire the right people. However, all of these approaches bring inconsistencies in data and uncertainty of completeness, all at a great expense.
Interoperability Issues
Legacy platforms were historically designed to perform general governance risk and compliance functions rather than specifically understanding the complex requirements or regulatory changes. As a result, data is often not leveraged efficiently within the organization, creating fragmentation across involved groups. Ultimately, it duplicates efforts, whether it’s obtaining content or dissecting it in a relevant way to any group and legal articles.
Inefficient and Costly
There’s often a poor user experience on legacy solutions, often deployed at an enterprise level. In the end, firms are forced to blend different solutions to serve different areas that aren’t using proper compliance tools within an enterprise, which creates many inefficiencies, and a lot of costs come along with that.
Finding Regtech Solutions
Specific and Relevant Results
With modern technologies, regulatory content can now be delivered in a more structured, meaningful, and accurate way. For example, a tool that automatically classifies all regulatory content from different sources to provide relevant material, which drastically reduces room for error.
The CUBE platform is the one that exactly does that. By leveraging AI, it identifies global regulations and compliance items and monitors their status, notifying about updates and existing regulatory gaps in procedures and policies in real-time. Due to that, businesses can control internal regulatory procedures in a way that would let them fit into regulations.
Mapping Automation
Regtech allows businesses to automate regulatory mapping by aligning the classified content that they have with their internal taxonomies.
RegDelta is one of the examples of regulatory mapping solutions. Like CUBE, it detects gaps between regulations and banks and firms’ internal policies, saving them from manual checks of paper documents. That is, upon every new regulation, the process can be repeated through the reusable automated framework.
Open API
With the right tools at hand, the data can be freely, securely, and seamlessly transferred across the organization. So, fragmentation is no longer an issue, and you can get the most value out of data.
Comprehensive tracking
Regtechs can deploy tools such as AI, machine learning, natural language processing, and more to capture a broader spectrum of financial services regulations. They can do it much faster and ultimately have a comprehensive inventory of regulatory content to deliver to customers.
Silicon Valley’s Compliance.ai offers an AI platform through which enterprises and financial services firms can monitor regulatory content. It automates research and provides a single place for tracking regulatory content. In the process, Compliance.ai leverages data from various sources such as federal agencies, executive orders, media, whitepapers, and more.
With the data provided by Complaince.ai, banks and financial firms can follow AML regulations and avoid fines that are worth billions of dollars.
Automated and Efficient
Regtechs significantly improve the earlier mentioned inefficiencies by introducing a more efficient way of working across an organization, which, in turn, improves operational commercial efficiencies.
In Conclusion
In today’s reality, the global regulatory landscape is evolving consistently and requires keen attention at many levels, such as local, state, federal, and country ones. That dynamic should equally include laws and regulations and directives and guidelines.
Though regtech can open up new challenges to businesses, however, it lets everybody know what must be done. You know that you have to do some training, testing, and validation to ensure that it consistently delivers the outcomes you look for.
Even upon reaching the point at which the system brings you sustainable value, you can’t stop as the world changes, creating the need to react and adapt.
