Ensuring cross-border compliance during a pandemic

There is no doubt that the number of country-specific regulations has significantly increased in the last ten years. Financial institutions need to keep up with all of them when competing for wealthy international clients. Bottom line is that they must ensure a good reputation both nationally and internationally to achieve long-term success. Now, the ongoing pandemic has uncovered previously uncommon scenarios of which companies must be aware of in order to stay compliant across borders.

The results of a recent study conducted by Apiax, clearly supports the assumption that today’s regulatory environment, if not properly managed, limits the business potential of financial institutions. For instance, only 55% of the survey respondents proactively serve their international clients, while 35% admit they struggle to communicate clear imperatives and prohibitions on relevant restrictions, with 82% of client-facing staff still having to wade through text-based legal opinions.

2020 has added an extra layer to this complexity, with new factors playing a crucial role in compliance management. To mitigate risk for companies, they must deal with regulatory restrictions in new situations brought to the fore by quarantines and travel restrictions. 

With that in mind, here are three simple day-to-day activities that exemplify the challenge of ensuring cross-border compliance during a  pandemic, how it affects serving global clients and how RegTech comes as a solution.

First, with the new virtual work environment, the offering of banking services and products via websites increased. In many jurisdictions such as in the UK, Singapore and many more, there are specific rules for offering services and products online. Companies must be aware of such regulations to not get penalized by local regulators, especially since the regulations differ from in-person offerings.

Another example is a common activity: meeting with clients. Although cross-border regulations are equally applicable to virtual meetings, companies tend to think that, since they are in a virtual scenario, these rules do not apply. According to the recent Apiax survey, 49% of companies say they have difficulty understanding the legal boundaries in this new meeting format, and only 32% have taken steps to cover the requirements.

Finally, communicating also differs when it comes to doing it verbally or in writing. Previously, relationship managers would talk to their clients in-person, now they communicate electronically more than ever. In some countries, this difference is enough to trigger additional regulatory restrictions on what service information and documents can be shared with a prospect or client. Furthermore, there are significantly more rules to be considered if activities are initiated by the institution compared to  when being initiated by the client. 

Ultimately, financial institutions struggle to keep up with the growing number of country-specific regulations regardless of a pandemic. However, this unprecedented event does bring about even more compliance challenges. For companies that rely on manual and text-based approaches, it becomes almost impossible to maintain their status and leverage their businesses.

Ultimately, in addition to the unprecedented Covid-19 pandemic, financial institutions are struggling to keep up with ever-evolving country-specific regulations. For companies that rely on traditional paper-based and manual compliance procedures, it has become increasingly challenging  to remain compliant and enable business activities.  

Luckily RegTech provides a solution to these challenges. According to the aforementioned survey, 98% of companies identify digital compliance solutions such as apps, as a suitable one for the challenges they face, with 96% finding benefits in machine-readable compliance rules. By leveraging the digital nature of compliance rules, institutions are able to stay readily up-to-date with rule changes and simplify their rule governing processes. 

In the end, serving clients in an international scenario is a challenge in its own right, with high risks and tight competition. However, by leveraging compliance as a business enabler, rather than a blocker, financial institutions are able to remain one step ahead of their competition.

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Apiax helps financial institutions to expand their business opportunities with compliance automation. Welcome to our blog!