What We Learned at RegTech New York: 3 Key Themes for Financial Institutions

From GDPR compliance to MiFID II, RegTech New York proved an excellent source of insight for financial institutions managing regulatory change.

2018 is almost here, along with several much-anticipated regulations. Though it can be complex, technical, and let’s face it, sometimes even a little dry, compliance isn’t something that can be overlooked.

In November, the Opus team had the opportunity to attend the 2017 RegTech New York Summit, a sister conference to RegTech London. It was a great show, lively and interesting, with over 400 registered delegates, 20 top tier sponsors and regtech influencers all in one place. We got to hear a lot of conversation on the future of regtech and how it’s making compliance solutions more effective.  

This year’s event focused on the upcoming roll out of GDPR and MiFID II’s January appearance. We heard three key themes for financial institutions bracing for a year of change — here they are.

3 Key Themes from RegTech New York

1. Interpreting regulations and applying new requirements is a major challenge.

Financial institutions have quite a few concerns around the scope of new regulations, the requirements they’ll be subject to, and how to prepare. How can you know if your firm or clients are affected or exempt?  How can you take steps to be compliant by the go-live date? We heard both of these questions at RegTech New York.

Interpreting regulations

A lot of regulations affect firms across the globe, even if a firm isn’t within its jurisdiction. Whether or not a regulation affects you is based on who you do business with, though this is sometimes forgotten.

For example, MiFID II is an EU regulation, and banks and financial firms often don’t realize that if they have a client based in the EU, they will fall under the scope of the regulation. The same goes for GDPR.

As a result, interpreting whether a firm is exempt from new regulations requires a much broader approach. One of the benefits of regtech solutions is the ability to automatically identify who your clients are and catalog whether they’re exempt from certain regulations.

Implementing new requirements

Regulatory requirements are inconsistent and can overlap, making it that much more difficult to fully implement them. It was shocking to hear at RegTech New York that 40% of regulatory spend happens after regulations’ go-live dates. This means that banks are constantly playing catch up, perhaps because the regulations were difficult to interpret or because compliance was not a business priority.

Hiring external consultants to come in and fix a problem after the fact, however, costs banks and firms more money than setting up a compliance plan from the start. Though sometimes there is a quick fix, the majority of regulatory spend is on remediation consultants or on fines for failure to be fully compliant. Some banks have spent as much as $2 billion on KYC remediation!

It’s important to raise a case for compliance internally and figure out the best solution for achieving it without interrupting business processes. Though it takes foresight and planning, developing a compliance plan before a regulation goes into effect requires a lot less work than trying to become compliant after the fact.

2. Staying flexible is key for managing the volume and pace of regulatory change.

With what seems like ever-changing and new regulations, how fast can firms really adapt? What tools and resources are necessary to keep up with the pace of regulatory change? To meet evolving compliance requirements, it’s important to keep internal processes open to reform.

Some banks set up separate regulations and policy interpretation offices, which helps to communicate the effects of a regulation and what measures need to be taken. To be fully prepared and compliant ahead of time, financial institutions need to see how regulations apply to particular parts of the bank, who the regulations will influence, the timeframe for achieving compliance, and how to roll out training.

Because this is a huge task, and one that will occur more frequently as regulations emerge, many financial institutions are exploring the possibilities of technology to streamline compliance.

3. Technology & systems infrastructures will simplify the complexity of data management to meet new regulations.

Data stored in legacy systems typically isn’t up to par for integration into new infrastructures. It also doesn’t represent an accurate and consolidated view of a firm’s business or client base. Without clean and accurate data, staying compliant with strict data protection laws like GDPR is a near impossible task.

As a result of mergers and acquisitions, it’s inevitable that a bank would own several different banks that all use different systems. From a data standpoint, things get messy when several systems are running simultaneously. With thousands of systems being used by one institution, it’s particularly difficult to ensure data is up to par and that everyone in the organization has access to the most accurate and latest information.

Human error also plays a role, as manual entry makes it quite likely that information will occasionally be entered incorrectly. Most financial institutions are massive organizations, and a lot of times cross-departmental teams don’t overlap. Most likely, this means the organization as a whole is not managing data in the same way. If so, how can they efficiently adapt to regulatory change and implement regulations in a systematic way?

This is where regtech can be a big help, and make data management much less complex. By implementing an organization-wide compliance solution, preparing for GDPR, MiFID II and other regulations can be a centralized process. Rather than being reactive and remediate to avoid regulatory fines, regtech proactively helps an entire firm prepare for compliance requirements.

Technology solutions that can clean, match and source accurate data into one view are helping companies achieve compliance. Such systems are critical as companies handle massive amounts of data and are being held to greater accountability for its management and security.

At Opus, we’ve become experts in third-party risk management and compliance solutions to help companies get it right. From individual solutions for regulations like GDPR to data cleansing services, we help make compliance less challenging and turn it into a business advantage for financial institutions. We can help you too — contact us here .

Carol Ann Thomas