The international regulatory framework is becoming increasingly complex. This will continue, with regulators cracking down on non-compliance with substantial fines. Financial institutions are looking to technology as a major part of the solution to help them set up the necessary procedural checks and logs, as well as track and maintain an auditable trail of transactions.
Processes and systems for managing customer data not only address regulatory reporting requirements more efficiently but also offer competitive advantages. While regulation may prompt financial institutions to implement processes that improve the transparency of their financial data, the transparency also offers insight into the overall health of the business and helps firms make better strategic and tactical decisions.
Taking Know Your Customer (KYC) regulations as an example, the days of complying with such requirements by checking individuals’ passports and establishing the source of funds have long since disappeared. Often there are multiple factors and questions involved. These factors and questions can vary depending on the outcome of the previous answer or a piece of data. This level of complexity increases the potential for error.
What can technology deliver? Modern IT systems can supply three key attributes for easing the burden of regulatory compliance: flexibility, the ability to drive consistent business processes through the use of ‘intelligent workflow’, and the ability to audit activities in order to prove compliance.
IT systems are exceptionally good at performing repetitive tasks in a consistent manner at high speed. Until recently, the missing piece was the ability of systems to add intelligence to these tasks. This intelligence is now readily available in modern financial services software, under the labels of ‘Customer Relationship Management’ (CRM), ‘Governance, Risk Management and Compliance’ (GRC) and ‘Workflow’.
IT systems vendors are now providing ‘packaged’ solutions which have workflow built into the core software application. The Certus Group has extensive experience customising these packaged solutions from all the major vendors (see our Products page). The key is for financial services providers to be able to convert their desired business processes, such as those driven by regulations, into workflow through easy and straightforward configuration, and then to be able to change quickly when regulations change.
One of the key aspects of regulatory compliance is an audit. If some or all compliance requirements are being managed, then a natural by-product will be a record of what has been done. Modern, flexible IT systems with good audit capabilities can help manage regulatory compliance. Technology gives business users more control by systematising desired business processes and then adapting these as regulations develop or change.