Embracing RegTech

The world is changing and changing fast. Compliance obligations, catalysed by substantial waves of regulatory reform, have swept many global industries. RegTech has emerged in recent years which leverages advanced technology to help organisations cope with this sharp increase in compliance.

The heightened obligations and the associated spike in firstly the cost of compliance and secondly the risk of non-compliance for organisations have necessitated a RegTech revolution. Companies should consider how to embrace RegTech and shed their heavy compliance burden.

The diverse and innovative range of RegTechs that have emerged display wide-ranging capabilities, including compliance monitoring, regulatory monitory and reporting, regulatory risk assessment, anti-money laundry (AML), Know your customer (KYC), customer due diligence, aggregation and transaction reporting amongst others.

As regulatory environments evolve and compliance obligations change, an organisations design and implementation of new processes to ensure compliance with rapidly changing legislation is an arduous and costly task. It can have a crippling effect on smaller organisations. Compliance obligations may fall by the wayside as notable issues are ignored or left unattended as compliance begins to feel an insurmountable task, leaving the consumer at risk, the organisation at risk of loss and accountable individuals at risk of prosecution.

RegTech helps organisations in automating their compliance functions and monitoring compliance outcomes in real time. The accuracy and efficiency of RegTech assists organisations in both:

• avoiding sanctions for non-compliance and
• minimising the cost of compliance, which can be harder to quantify but equally debilitating for many organisations.
  

Many organisations have begun adopting advanced automation technologies as part of their operations in order to accelerate growth, such as robotics, machine learning and natural language processing. Whilst this gives organisations significant scope to uplift their operational capability, they should consider the risks and exposure to data breaches, cyber hacks, money laundering and other such activities that exist on the flipside of increasing digitisation.

As the nature of operations and their associated risks continue to evolve, organisations should consider the way their risk and compliance functions are run and if they continue to keep pace.

In Australia, the priority for many organisations is to act quickly on customer remediation obligations borne out of the Financial Services Royal Commission to minimise the cost of these programs.

Beyond remediation the Royal Commission triggered a wave of regulatory reform. Organisations should act now to ready themselves for compliance and avoid the very same failings they are now forced to remediate for. For non-Financial Services organisations, the Royal Commission clearly demonstrates the need to proactively manage risk and compliance, and adopt a best practice, not tick-the-box approach.

KPMG’s specialists can help organisations looking to identify, implement and integrate the specific capability required within their organisation. Our knowledge and relationships within the RegTech market can facilitate the procurement of that need.

While many RegTechs are powered by cutting edge market leading technology, many lack clarity around harnessing such capability to solve real world client problems. KPMG’s wealth of industry knowledge and experience allows us to assist RegTech companies in tailoring their solution architecture to match current industry needs, driving productive collaboration in the space.

Whilst there are clear benefits of collaboration between RegTech and industry, there are practical roadblocks that currently exist. The lengthy on-boarding procedures necessary for large companies within industry can often starve RegTechs of oxygen, as these businesses are often at the opposite end of the maturity spectrum and have limited access to capital. It can take between 12 and 18 months to on-board RegTechs, with small scale Proof of Concepts (POCs) taking as long as 6 months – with these current timelines simply unsustainable.

Leveraging our detailed knowledge of organisations in both spheres, KPMG can help bridge this gap through readying each party for collaboration with the other, and assisting in a smooth implementation and operationalisation of RegTech solutions within any business.

While most RegTech startups invest heavily in product development and profess to power their solutions with cutting edge technology, the reality is that the quality of capability these businesses actually possess varies significantly in the Australian market.

Certain areas such as anti-money laundering (AML) and know your customer (KYC) compliance where effective solutions have been developed are saturated with an overflow of different solutions delivering the same outcome.

KPMG’s detailed knowledge of the RegTech market and the individual players within it, can be helpful in the decision making process for organisations seeking to procure specific capability from the RegTech space to solve challenges in their organisations.

• Providing education for clients on the RegTech landscape
• Facilitating collaboration between clients and RegTech companies
• Understanding a client’s needs via human centred design and data driven discovery

• Advising clients on unique RegTech solutions to solve problems
• Architecting state of the art technology solutions
• Implementing and integrating RegTech within a client’s existing ecosystem

• Identifying and acting on opportunities that emerge from regulatory landscape changes
• Proactively helping manage risk to enable clients to take calculated risks and capitalise on market opportunities
• Helping clients create competitive advantage through differentiation