RegTech 101: You can’t regulate what you can’t see

With a continually changing global regulatory environment, it’s only getting more challenging for financial institutions — including banks, asset managers and insurers worldwide — to keep track of, maintain and demonstrate compliance with all of their state, national and international requirements.

For example, an FIS whitepaper reported that in 2019 there were:

  • 750+ global regulatory bodies
  • 2,500+ compliance rule books
  • 200+ regulatory alerts around the world every day

Additionally, “Up to 15 percent of financial institutions’ staff now work on governance, risk management and compliance — yet even with this investment, regulatory compliance is by no means assured,” according to the 2019 KPMG article, RegTech Beyond Compliance.

Why is this significant?

“Financial institutions have historically borne the brunt of regulatory fines and transformation costs for failures in FC controls, resulting in over $36 billion in fines globally for non-compliance with Anti-money Laundering (AML), Know Your Customer (KYC) and sanctions rules since the financial crisis. In 2019 alone, penalties for sanctions violations represented 40 percent of the total regulatory fines levied against global firms,” according to the August 2020 Accenture article, Sanctions Risk and the Insurance Industry.

And for those who are still reliant on older methods of managing compliance, like spreadsheets, a priority to modernize is critical in today’s world. Where the industry was once content with a slow approach to technology adoption, disruption from alternative providers entering the market suggests slow-and-steady will no longer win the race, or even be able to survive.

Digital disrupters are here to stay.

Meanwhile, to keep up with the demands of the industry, priority one for insurers and other financial institutions is making sure that all critical information is secure, mobile, accessible and transparent to those who need it. Institutions of all sizes are turning to solutions that connect systems and provide that complete customer view, with users having instant access to all relevant information directly from their familiar claims, policy and CRM system interfaces.

Using RegTech to automate processes, compliance professionals can respond more effectively to changing regulatory demands, focus on higher-order activities and become more valuable business partners and advisers.

– Deloitte.

Man signing a documentEnter RegTech to ease regulatory processes

As financial regulatory pressures grow, organizations are increasingly leaning into the smart technology that’s transforming the industry: RegTech. RegTech eases and helps solve regulatory and compliance challenges by employing innovative technology solutions that reduce costs — through a combination of decreasing time spent in pursuit of compliance and preventing fines resulting from non-compliance.

Institutions large and small are rapidly recognizing RegTech automation as a key strategic initiative for compliance.

“Within the next three to five years,” according to the Deloitte article InFocus: Optimizing digital transformation in the insurance industry, “we expect that insurance RegTech solutions using sophisticated analytics, data integration, robotic process automation, natural language generation/processing, artificial intelligence and other emerging technologies will be positioned to produce a sea change in how insurance company compliance organizations operate.”

“By using RegTech to automate routine processes — thereby potentially improving quality and reducing costs — compliance professionals can better respond to changing regulatory demands and apply analytics to advise business functions and determine areas of heightened regulatory risks, such as agent sales practices, rate and form filings, customer and third-party fraud and business operations,” Deloitte also states.

3 key areas where RegTech provides immediate and enduring value

Instead of relying on disparate systems and spreadsheets, RegTech solutions enable automation, security, transparency and productivity, including in these critical areas:

1. Managing fraud cases

Insurers and other financial services organizations must protect themselves from fraud. To do so, you must be able to not only detect potential fraudulent activity, but deploy the correct resources to investigate and access information regarding the transaction. You also need the ability to track and share findings every step of the way.

RegTech solutions allow investigators to easily log, access and interact with critical data involved in fraud investigations.

2. Managing compliance regulations

The cost of doing business in a highly regulated world is immense. It requires a deep knowledge pool as well as the team and technology to keep up with new regulations, which are wide ranging, in constant flux — and dependent on your own accurate and accessible data.

RegTech solutions are key in helping you:

  • Stay informed of new regulatory requirements
  • Keep up with changes to existing regulations
  • Stay in compliance with regulations and prepared for audits

Strategic RegTech solutions also provide 360-degree views of all case-related information – including data records, documents, forms and history. They log every time a user accesses, views, edits or acts on a document, so executives have transparency and managers can ensure everyone is following your organization’s specific rules to meet regulatory requirements.

3. Managing effective document retention

With increasing regulations specifically focused on the handling of data across industries, incorrectly handling and destroying information could be a costly mistake.

By incorporating a document retention strategy, your organization can reduce the risk of information getting into the wrong hands — because information destroyed is information that cannot be accessed. Other benefits of document destruction include less content to pull for regular audits, a reduction in database bloat and a lowered risk of incurring fines.

RegTech automation for governance eliminates the costly, time-consuming legal consultation required to create an exhaustive document retention strategy, including:

  • Applying aggregated, updated retention regulations and citations to all relevant documents in OnBase
  • Ensuring data within stored documents is in compliance
  • Providing aggregated information governance policies with simple descriptions
  • Enabling complete automation of the destruction of documents, per regulatory guidelines

It also helps ensure data is in compliance — giving your organization assurance that employees and customers, the lifeblood of your business and the key to your profitability, are protected.

If you think compliance is expensive, try non-compliance.
– Paul McNulty, Former U.S. Deputy Attorney General

The time is now to automate costly, risky, manual or disconnected methods with RegTech

“Financial institutions have paid well over US$340 billion in fines in the 10 years since the financial crisis, and one report estimates that the total is likely to top US$400 billion by 2020,” stated KPMG.

And compliance is only getting more complex. That’s why centralized governance is the top best practice in reducing total compliance costs, according to the Ponemon Institute.

You can reduce your risk, as well as the time and costs associated with regulatory compliance by employing RegTech solutions that enable control of the complete view of critical information for your institution. Ready to learn more?

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Sarah Stoner

As a Content Strategist for Hyland’s Global Services, Sarah has a background in business and technical writing and has worked in several areas of the organization since 2003. She has... read more about: Sarah Stoner

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