When seeking to expand their businesses, enter new markets or grow their offerings, the way how financial institutions deal with regulatory compliance can be seen either as a big blocker or a business facilitator.
The impact of the pandemic has only accelerated the need for innovation and technology. Where banks have used technology to automate their compliance processes before, this is likely to increase in 2022.
Here are the top 5 compliance automation trends that you need to know:
- Regulatory AI: Artificial intelligence (AI), machine learning and compliance
Data is the currency of today. And what are regulatory documents other than Big Data waiting to be leveraged? No surprise then that AI and machine learning have found their way into regulatory technology to help manage and govern large volumes of regulatory information.
AI and machine learning help translate regulatory knowledge into actionable information, as reported in this article published by Regulation Asia. But they need to be guided on their way to learn regulatory language.
“Regulatory AI will provide support for repetitive tasks when digitising compliance rules. It will be especially useful to improve coverage of regulatory contexts and keep compliance up-to-date. A modern Regulatory AI needs to be transparent and explain its decisions so that humans will be able to collaborate with it in a meaningful way.”
Peter Bouda, Head of Data Science and Engineering at Apiax
Bottom line: AI and machine learning can increase efficiency in creating and maintaining digital compliance knowledge by supporting the user to create high-quality & correct digital rules.
- Taxonomies, knowledge graphs and compliance
Taxonomies and knowledge graphs are the logical complement of AI and machine learning. Let us explain: the taxonomy is a way to classify things that allow us to describe “the domain of information through a standardized vocabulary”. This is done by making connections between concepts and capturing alternative ways of describing the same concept. The role of the knowledge graph, on the other hand, is to capture the gathered information, reduce its complexity and organise it into knowledgeable data.
But, how is this important to compliance automation for your organisation or as a compliance automation tool? As said before, the knowledge graph is a logical continuation of AI and machine learning. When bringing them together, machine learning will have much more capabilities. Not only do knowledge graphs provide high reliability and explainability of information gathered, but with the data schema of a graph machine learning’s capability will increase drastically, which has a direct impact on the possibilities of digital compliance solutions.
“Knowledge graphs will change the way regulatory topics are explored by crossing and integrating the data of different sources and use it to bring smartness. At Apiax we want to build a regulatory knowledge graph capable of delivering meaningful insights to help experts fill in the gaps and make use of complex legal ideas. We want to challenge the regulatory compliance world and become the real-time subject matter assistant to legal experts.”
Peter Bouda, Head of Data Science and Engineering at Apiax
Bottom line: Embedding compliance with simple yes-or-no answers to complex regulatory issues? Thank taxonomies and knowledge graphs.
- Embedded compliance
A new compliance automation solution has arrived. The use of regulatory technology is not just a ‘nice-to-have’ anymore, rather it has become a business accelerator by providing value-added technology. For this change to gain widespread acceptance, mature providers need to jump on the bandwagon. Apiax was already able to secure such an adoption with Credit Suisse.
To us, compliance automation means embedded compliance. The merging of regulatory technology with business processes is now possible. More and more companies see regulatory technology as part of their corporate structure as it helps them seize business opportunities, reduce costs and mitigate risks.
“We see a rapid shift away from traditional resource-intense compliance frameworks which are based on policies, training and monitoring towards digital-centric compliance frameworks. And there are obvious reasons for this: by integrating digital compliance rules into core processes, an organization can massively reduce compliance risk by replacing sample-based compliance monitoring with an embedded compliance or compliance-by-design approach.”
Ralf Huber, Apiax Co-Founder
Bottom line: Embedded compliance allows financial institutions to flag regulatory and tax implications in existing banking software solutions, digital channels, or processes.
- Cross-border compliance and regulatory technology in APAC
Financial institutions that want to serve a global client-base need to cope with a growing list of ever-changing regulations. They are required to actively manage and ensure what is commonly called a cross-border framework. We’ve conducted a cross-border compliance survey to find out where companies struggle the most.
Currently, 91% of the surveyed companies still source legal information in a traditional way, meaning through memos, phone calls or email. Therefore, there’s a big potential for compliance automation to be used by financial institutions when it comes to cross-border compliance.
With impressive growth rates over the last decade, APAC has become a key region for the financial industry. Hong Kong and Singapore – along with Switzerland the world’s top three offshore wealth centres – are set to profit most from this change.
Just like in other financial centres across the globe, enabling growth, innovation and customer-focus despite regulatory complexity has become one of the main challenges for the financial services industry in the APAC region.
“Taking a closer look at Asia, Hong Kong and Singapore are now the largest cross-border financial centres in the world after Switzerland, attracting clients from all over the world. The speed at which wealth and asset managers generate new revenue is hampered by manual compliance processes that cannot handle the expectations of the clients. Yet, the compliance team has no effective solution to offer; not unless there they start to look at regulatory compliance for banks as a business enabler. This would lead to a digitisation of complex and dynamic rules leading to a full compliance automation.”
Yvonne Ngai, Business Development Singapore
Bottom line: Embedded compliance can simplify regulatory compliance in every jurisdiction – inclusively in Singapore. Learn how Apiax sets out to help wealth managers in Singapore.
- Compliance automation for Data Protection
In our digital and ever-connected business environment, dealing with data happens everywhere. In order that those activities happen in compliance with data protection rules and regulations, new technologies and innovations are needed. In 2020, Apiax conducted a Data Protection survey to find out what the usual operating patterns are when dealing with data protection.
70% of APAC companies said that regulatory requirements around transferring data are the biggest challenge in data protection. This is very interesting bearing in mind that the use of RegTech can drastically ease the compliance with these regulatory requirements. Oliver Riedel, Product Manager at Apiax, explains how:
“The Covid pandemic has shown that businesses tend to be less vulnerable in times of crises if they have started to invest into digital environments. It is clear that data is the key for businesses to grow and hence data protection rules are a key element for business in 2022 and beyond.”
Oliver Riedel, Product Manager at Apiax
Bottom line: Embedded compliance can help companies increase their efficiency in a range of regulatory topics – also in data protection.