How RegTech Helps Compliance Teams Increase Efficiency and Reduce Risk

December 5, 2018 by Burt Esrig

Chief compliance officers (CCOs) of investment firms are increasingly looking to regulatory technology solutions (RegTech) to help compliance teams – as well as the business – be more efficient, effective, and vigilant. CCOs recognise the need to simplify and streamline workflows in order to free up time and reduce compliance costs, so that compliance teams can undertake other tasks and focus on strategic activities that add value to the organisation.

On the other side of the equation, financial regulators are increasingly developing and using their own RegTech tools to collect and analyse data on investment firms’ regulatory compliance. This means CCOs are facing the additional challenge of keeping pace with regulators’ technological capabilities in addition to evolving regulatory compliance requirements.

While the term “RegTech” broadly refers to any technology that supports regulatory compliance, precisely what that encompasses can be ill-defined and misunderstood. Perhaps that is because compliance has traditionally been supported by manual processes. Many core compliance functions – interpreting new regulatory obligations, defining and administering policies, completing filings and declarations – require human judgment and do not immediately lend themselves to automated solutions.

How Can RegTech Solve Compliance Challenges?

Although regulatory compliance will always be a function led and directed by people, technology can support those efforts and make processes more efficient and effective. Here are five ways it can be of benefit to your firm to make RegTech an everyday part of your compliance program:

  1. Automate data collection and processing – Many regulatory requirements, such as those involving trading data and electronic communications, require the processing of large volumes of structured and unstructured data, complex analysis, and access to audit trails – all tasks that are costly and time-consuming, if not impossible, to perform manually. For other activities, such as recording the personal trading of employees, or their political contributions, technology makes it easier and more efficient to both comply and to demonstrate compliance.

    Regulators believe that firms that employ technology solutions take compliance more seriously, and are encouraging the development of RegTech approaches. For asset management organisations, investors feel more comfortable with the operational robustness that RegTech can bring to compliance processes.
  2. Reduce the risk of manual process breakdowns and errors – It’s a recognised fact that organisations that rely on paper, spreadsheets, and emails to manage compliance processes face higher levels of operational risk, which in turn increases their exposure to regulatory failings. Today, compliance processes are more complex than ever before, placing firms that rely on manual methods in significant danger of dropping the ball accidentally. A simple mistake can quickly escalate into damaging media coverage, regulatory fines, and even individual prosecutions. A single error can wipe out a chunk of shareholder value, or even put a firm’s viability at risk.
  3. Adapt quickly to regulatory change – Regulators have adopted a more proactive approach towards both systemic risk and individual firm oversight since the Financial Crisis of 2008 – often driven by legislation. The pace of new rules shows no signs of slowing down. For example, the EU this year has seen the implementation of the Markets in Financial Instruments Directive II (MiFID II), as well as the General Data Protection Regulation (GDPR) and a host of other rules. For UK insurers and asset management firms, the Senior Managers and Certification Regime (SM&CR) deadline is looming ever closer. CCOs and their teams recognise that having technology solutions in place that are adaptable to new regulatory programs is essential. They are also increasingly understanding the value of RegTech in helping teams better manage regulatory change across the organisation.
  4. Free up time for strategic initiatives – CCOs and their teams are evolving from data collectors to data analysers, and they need the technology to support this transition. In part, this is because regulators, shareholders, and investors expect firms to operate ethically, detecting wrongdoing themselves rather than waiting for the regulator to raise an issue. To operate in this more proactive fashion, teams need to be able to investigate and evaluate compliance data – and not spend all of their time gathering it. In addition, compliance teams now need to produce more frequent and insightful reporting to regulators, the C-suite and the board. They must put the information in those reports into context, providing strategic insights into the firm’s operations, risks, and opportunities. Fulfilling these roles would be nearly impossible without the support that RegTech brings.
  5. Promote a culture of compliance across the organisation – For decades, each new compliance requirement from a regulator was treated as a specific, finite project to be completed by the compliance team. Today, it’s clear that regulators are expecting a much more holistic approach to compliance from the organisations they supervise. Boards of directors and senior managers at firms with advanced compliance programs are actively engaging with their compliance culture, operating ethics, and day-to-day compliance processes. The compliance team needs to work more deeply with a wider range of stakeholders and consider compliance data in a more strategic way. To support all of this, compliance teams are increasingly looking to adopt an integrated approach to their compliance technology – to bring a single, cohesive lens to compliance activities. They also want to move away from trying to manage the complexity and expense of a stable of disparate solutions. By working with a single compliance platform, they are taking a more connected approach, making it easier to protect the firm and deliver shareholder value.

Despite these important reasons to engage with RegTech today, it can still be a daunting prospect to undertake a technology implementation. It’s important to work with a trusted RegTech partner, such as ACA Compliance Group, to deliver on both compliance best practices as well as a more connected approach to compliance technology.

How ACA Can Help

ACA helps compliance teams meet their regulatory obligations more effectively and efficiently through a combination of RegTech solutions and regulatory compliance advisory services. ACA’s technology consultants help firms implement RegTech programs that deliver value across the organisation, while our team of experienced regulatory consultants helps firms understand their compliance obligations.

ACA’s RegTech solutions include functionality for compliance program management, marketing reviews, code of ethics/personal trading management, trade surveillance, cybersecurity and risk management, vendor management, regulatory reporting, pre- and post-trade portfolio compliance, data warehouse, and trade allocations.

To learn more about how ACA Technology can help or to request a demo, contact us now.

About the Author

Burt Esrig joined ACA Technology in 2017. As a Managing Director, he leads efforts to create regulatory technology (“RegTech”) employee compliance products for use by a wide array of financial institutions. Burt has more than 20 years of experience in financial and technology businesses, marketing, and business creation and has established a solid track record of building and expanding superior distribution teams and unique, profitable businesses.

Prior to ACA, Burt served as chief operating officer of Marstone, Inc., a digital wealth management technology company. There he managed overall business efforts to create digital platforms for banks, broker-dealers, and investment advisers. He has also been a managing director in the UBS fixed-income division. In that capacity, he managed the securitized products marketing function and then conceived, planned, and executed the creation of infrastructure for the acquisition, pooling, securitization, and disposition of high-quality residential mortgage loans.

Prior to UBS, Burt was at PaineWebber Inc., where he was managing director in charge of international fixed-income sales and US securitized products and credit products marketing. Earlier in his career, he had fixed-income trading responsibilities in US government and money market securities at JP Morgan and other firms.

Burt earned his Bachelor of Science degree in Computer Science from the State University of New York at Stony Brook. He has also completed non-degree coursework in accounting, marketing, and finance at New York University.