How RegTech is lifting the burden from compliance demands

Whether it’s fraud, money laundering, bribery, insider dealing, or even financing terrorism, financial crime is a global problem – certainly not one limited to Asia.

Over time, financial crime rates have not only risen higher, but they have grown to be more complicated and harder to detect. This has led to ever-greater regulation, heavier-handed  governance and the introduction of stricter requirements.

According to Jessica Chuah, an industry expert on financial compliance, firms themselves need to be alert and attuned with changes in the financial landscape to better understand why delivering on regulatory requirements can help protect operations.

“With regulatory requirements continually changing, industry experts agree it’s imperative that financial firms review their business processes to evaluate compliance and ethics risks at least once a year, while always monitoring recent changes to regulations and laws,” Chuah told Tech Wire Asia.

However, with a rapid growth in fintech innovation, regulators are increasingly challenged to keep pace with the evolution. Aware that these new, tech-centric solutions represent the future of finance, regulators are pressured to find new guidelines that protect from financial crime, without stifling new industry growth. 

Players within the industry are being pushed to operate on risk-based compliance measures instead of rules-based models that were previously in place. In endorsing risk-based compliance, financial firms need to process a lot of data to ensure operational decisions have been assessed.

This often includes strings of processes that are heavily manual, repetitive and downright draining. In many instances, compliance procedures can weigh firms down in terms of speed and operational growth – but things don’t have to be that way.

As firms are pushed to transform and embrace digital, compliance is proving challenging. The have led to the rise of regulatory technology – or RegTech – which is helping finance firms meet compliance requirements more effectively and efficiently so that the operations can continue to grow.

Experts like Chuah believe that RegTech solutions could profoundly revolutionize compliance management among financial firms that are already working with fintech

“It is not new, the use of technology to facilitate the delivery of regulatory requirements,” said Chuah. “RegTech is a technology that seeks to provide configurable, easy to integrate, reliable, secure, and cost-effective regulatory solutions.”

As firms grow and acquire greater capabilities, meeting regulatory requirements will get more complicated as systems become more integrated and data grows in volume. When that happens, firms will need RegTech and the right compliance program to help them meet regulatory requirements, or risk facing legal and reputational consequences.

“Companies are becoming more alert to the risks of falling out of compliance, which range from everything from fines to imprisonment,” said Chuah.

In addition to considering RegTech, companies can also thoroughly revise their compliance management plan. Chuah said that for a compliance and ethics program to shine, the organization must develop a reporting structure, preferably one that leverages technology effectively.

“These reporting structures will vary greatly depending on the business and the types of compliance challenges it faces,” added Chuah.

At the end of the day, it’s all about what financial companies are willing to do in order to make sure that they are able to meet the standard practices of their industry.

Experts like Chuah must help finance firms and regulators in striking a balance, better meeting their regulatory requirements without imposing heavy constraints on their operational efficiency.

When it comes to innovation in finance, there is no going back, but out of every industry, perhaps this one needs to move forward with control, the most.

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