IMPLEMENTING BEST PRACTICE With ﬁnancial services subject to ever-increasing layers of regulation, Andrew Frost explains how properly implemented and monitored regtech can help
he insurance industry has been subject to a wide range of global regulatory changes since the crash of 2008, creating extra work – at excessive costs – for compliance teams worldwide. In a bid to reduce risk, regulators have increased demands to satisfy their reporting frameworks. Only last year, the UK’s Anti-Money Laundering (AML) regime was amended to implement the Fourth Money Laundering Directive (MLD4). These new regulations require ﬁrms to: • Have a complete AML/Know Your Customer (KYC) programme implemented; • Have adequate resources in place to monitor and enforce compliance with the relevant requirements; • Put in place adequate controls and oversight over the AML programme; KNOWING • Respond to any changes YOUR A-Z quickly and produce A anti money laundering comprehensive reports; b budget • Comply with latest data c communication security rules; D data security • Provide full audit trails. E expert However, we are seeing an f frameworks increase in ﬁrms failing to g global adequately meet all obligations. h high level A pattern is emerging, including i in-house issues with decision-making, j jurisdiction k KYC out-of-date technology l ledger and an increasingly global m monitoring landscape. Firms often overlook n negatively regional oﬃces and the people o oversight implementing policies on a p pattern daily basis, preferring to draft q quickly policies in-house at high level. r regulators This can lead to good and strong s solutions policies in the headquartered t technology jurisdiction, but ones that are u updates impossible to implement and v via that miss certain jurisdictional w work regulatory nuances. x eXtract Tackling issues around y your technology can be solved by the z zones introduction of shared ledger facilities, though setting these
up and managing the necessary infrastructure can take time and be disruptive.
TECH TO THE RESCUE? Automating processes can ensure that ﬁnancial institutions comply with regulations on a global scale. While regulatory technology, known as regtech, is offering some solutions, to maximise the potential within an organisation will still depend on the skilled use of that technology. A lack of communication across zones leads to a host of problems – processes are duplicated and multiple requests are made to the same entity via different routes, negatively impacting clients. Populating a database is all well and good, but how the algorithms are then used to extract data, check and update it, analyse and communicate it eﬃciently requires expert knowhow. A trusted service provider can not only set up the shared ledger facility but also ensure that all regions communicate with one and other by sharing the same analysed information.
CROWN JEWEL Regtech can improve eﬃciency, cost and speed, while helping to streamline and simplify processes; but the crown jewel will be the ongoing monitoring. Software can simultaneously monitor the client after onboarding and the global regulatory landscape. Software can identify updates in regulations and sanction lists, but it will take a skilled person to highlight and analyse these. New and innovative technology will continue to ﬂood the market. What will be important is how ﬁrms decide to use it. To realise its full potential, ﬁnancial institutions would be wise to ensure that they also employ people with the correct manual skills and expertise. They can combine the technology implementation with the manual analysis. This will set an organisation apart and give it the best possible tools to ensure full compliance, on budget and on a global scale. ● Andrew Frost is executive director at Lawson Conner
thejournal.cii.co.uk / The Journal / June - July 2018
48_A-Z__Cll The Journal 48