How RegTech can transform your business (and your customer experience)
In today’s fast-paced and rapidly changing environment, regulated financial services businesses are constantly challenged to find innovative ways to harness strategic growth opportunities, manage compliance costs and streamline processes, all whilst ensuring compliance with evolving regulatory requirements and providing a leading client experience.
Navigating regulatory compliance, understanding business priorities and meeting client expectations is a constant challenge. Juggling these priorities and leveraging RegTech to assist with regulatory challenges will be the difference between many organisations remaining competitive or simply losing pace.
What is RegTech and why is it so important?
RegTech is simply any technology that uses information technology (IT) to enhance a firm’s regulatory processes. Whilst this sounds simple, there are a number of considerations before embarking on investment in RegTech.
We see the 3 key RegTech pillars as:
1. COST - Process streamlining and cost efficiency (people used for best purpose, direct data interface – avoid excel dumps, enter data once)
2. CUSTOMER - Enhancing customer experience - putting the customer at the centre of what we do
3. COMPLIANCE - Facilitating and evidencing regulatory compliance.
Process streamlining and cost efficiency
If implemented correctly, RegTech can assist businesses with a more uniform, cohesive and consistent approach to data quality from the onboarding stage through to ongoing monitoring and management of a customer. The use of automation significantly contributes to reduced errors due to reduced manual processes and human biases, the standardisation and improved quality of data, improved compliance and reporting capabilities, and more robust red flag detection and fraud surveillance.
While not eliminating human capital spend entirely, firms can nevertheless focus on redeploying highly skilled compliance resources, moving away from routine processes and towards analysing output and applying critical judgement to the machine reporting.
This will inevitably bring efficiency and cost saving benefits for firms. It can also work to deliver an enhanced digital experience for customers.
Customer experience – putting customers at the centre of what we do
Our businesses only exist because of our customers, so ensuring that they are considered when designing processes and procedures is vital, particularly in respect to onboarding and ongoing Customer Due Diligence (CDD) requirements.
RegTech solutions, such as onboarding and risk assessment tools, typically provide better quality analysis of information, allowing touch points with clients to be more structured and, as such, there is often a significant reduction in client complaints about being asked to refresh their information. As privacy is also a key consideration for clients, being able to provide information in digital form via a secure platform (rather than email), all adds to the customer experience; additionally, under the “Right to data portability” in the General Data Protection Regulation (GDPR) and local equivalents, data subjects have the right to receive their data in a machine-readable format, and these tools can often facilitate that data provision.
Facilitating and evidencing regulatory compliance – single source of the truth
As international finance centres, our regulatory authorities in the Crown Dependencies place due emphasis and scrutiny on financial services businesses knowing their customers and complying with the anti-money laundering (AML) and countering the financing of terrorism (TF) regulations and providing robust evidence thereof. The old adage ‘if it isn’t written down, it didn’t happen’ certainly holds true when considering regularly oversight.
The regulatory requirements in respect of CDD imposed in our jurisdictions can be complex, particularly for those customers who pose a higher risk to our businesses and jurisdictions. Our clients often cite CDD compliance (both actual compliance and the evidencing thereof) as one of their key business challenges.
As regulated businesses grow and consolidate, manual or unstructured recording of information can be inconsistent, open to human error and over familiarity. This brings the risk that customer information and customer risks may not be fully documented and, as such, a business may not fully identify and evidence all risks associated with customers.
Despite the many benefits noted above, RegTech is not in itself a panacea – it requires effective data standards and governance frameworks. In other words, systems are only as good as the data entered and their governance.
Whether you adopt RegTech or utilise a primarily manual compliance framework, it is important that periodic governance reviews are undertaken to provide Boards and compliance functions with assurance over such factors as:
- Governance, testing and ongoing monitoring
- Data quality and existing processes
- Knowledge and skills of staff
- Operational resilience and controls
We regularly undertake such reviews, providing an overview report based on compliance with local (and/or group) requirements, and practical recommendations for improvements.
So what is the answer…??
What solutions are available for incorporating RegTech into a business?
Key to achieving the above three pillars of Cost, Customer and Compliance is ensuring customer information is maintained and evidenced via ‘a single source of the truth’ (with one point of data entry), able to provide comprehensive documentation and a robust audit trail, making it simple to demonstrate regulatory compliance.
The market hasn’t seen a single ‘panacea’ standard for CDD and client onboarding and, as such, there are a large number of different RegTech solutions available, all with slightly different attributes.
At KPMG we are able to assist with finding solutions, which we can help customise to meet your specific needs, and we already offer a number of accredited end-to-end RegTech solutions.
One such solution, that incorporates RegTech with human overlay, is the KPMG ID Register (“the IDR”), which brings a full suite of onboarding, risk assessment, monitoring, remediation/outreach and reporting functionality, including integrated FATCA/CRS reporting. The IDR supports you from the inception of a client relationship and throughout its lifecycle, and acts as a single golden source of truth by remediating legacy client records and maintaining them throughout their lifecycle.
IDR offers multi-jurisdictional service providers the ability to onboard their clients once across all jurisdictions, providing a globally consistent client experience to the highest common standards as a complete onboarding solution across securities requirements, KYC, FATCA/CRS and legal support. As a managed service, delivered by an experienced team, the IDR supports all clients, irrespective of their familiarity with technology, and as such is a proven and lower-risk approach to digital client onboarding.
The way forward
It is clear that, to manage regulatory risk and provide a structure around compliance functions, whilst demonstrating transparency and providing access to consolidated live data, our businesses will need to embrace a triumvirate of People, Operations and Technology; the tech simply facilitates the process, which is actioned by your people.
The global RegTech landscape is continuously changing. The key to making technology work effectively for you is to find the right solution for your business, and your customers, to help deal with the demands, complexity, and cost of compliance in a fast-paced regulatory environment.