Digital cross-border rules are shifting the way financial firms in APAC manage compliance

As financial institutions continue to adapt to hybrid working arrangements, risk management still remains a high priority on their agendas. Given the importance of the financial sector in Hong Kong and Singapore, it is vital that financial institutions (FIs) find a smart way of managing regulatory compliance.

In our recent webinar on how digital cross-border rules are changing the way financial firms tackle compliance we present the key challenges FIs face when it comes to compliance management, and the practices that APAC firms are implementing to deal with regulatory updates that remote settings have brought about.

To explore the topic, we spoke to Sean Ren, Director Director at Financial Services and Operations at KPMG China, and Thomas Imhof, Regulatory Product Owner at Apiax. In the webinar, they discuss how financial firms are leveraging digital solutions, what are the digitalisation priorities for such institutions, and unravel the barriers that come with the adoption of RegTech solutions.

Rising demand for RegTech solutions

Even before the pandemic, there had been an uptake in demand from financial institutions for RegTech solutions. However, due to the pandemic, the demand has accelerated, and more and more financial firms are looking for digital regulatory and compliance solutions. 

“Cross-border compliance is a great example where digital solutions not only helped businesses manage their compliance risk, but also helped organisations improve customer experience.” says Sean Ren

– Sean Ren, KPMG

Regulators in the APAC region continue to promote and support the adoption of RegTech solutions. “Cross-border compliance is a great example where digital solutions not only helped businesses manage their compliance risk when working remotely but also helped organizations improve client and employee experience and streamline operating efficiencies,” says Sean Ren.

Required automation of cross-border compliance in different business areas

The Apiax Cross-Border Compliance Survey 2022 shows that financial firms have started to understand how cross-border restrictions can impact many key processes in a bank. This has led to an increased need and demand for automated clarifications on cross-border compliance, especially for those dealing with various business activities affecting multiple jurisdictions.

According to the survey respondents, there are top 3 processes where they see a huge benefit of having an automated digital check of cross-border rules: cross-border check on investment proposals (17%), pre-trade check for order execution (16%), and dissemination of research and other materials to clients (14%).

Commenting on the survey results, KPMG’s Sean Ren confirmed that all of these activities are definitely also relevant to financial institutions in APAC. However, given the fact that travel has finally restarted for many of the client-facing employees in the region, the automated compliance checks involved when planning a meeting with a customer—right down to requesting travel authorization—seem to be among the most useful ones.

Similarly, end clients are also likely to be traveling more. Meaning that client-facing employees must also be able to recognize where their clients are located in order to accurately follow the right cross-border guidance and meet all compliance requirements.

Wealth managers are investing in digital compliance solutions

Spending on digital compliance solutions is a top 3 area where wealth managers will continue to increase their investment. Sean Ren shared an insight that distribution suitability spending remains at the very top of budget allocations for FIs in APAC and that given the strong promotion from regulators to adopt RegTech, many financial firms are clear about their priorities. “I would fully expect that cross-border suitability will remain a top priority in the region for many leading wealth managers”, Sean Ren added.

Hong Kong: key barriers to adoption

The HKMA Fintech 2025 Tech Baseline Assessment, which surveyed a large number of banks with significant operations in Hong Kong, showed that banks are generally optimistic that their investments will yield results. 

More than 90% of banks believe they will make good progress in achieving their goals for a greater use of FinTech. These include improving customer experience; increasing operational efficiency; improving accuracy; as well as improving risk management and monitoring capabilities.

Based on the HKMA assessment, industry participants note that the highest barriers to adopting certain technology and solutions is not due to a lack of internal promotion or support, but rather concerns about the actual technology itself and the risk of failures associated with it. Given the fact that there are also serious manpower and often capability challenges in the region, organisations need not only to adopt digital solutions but make sure the integration and implementation are successful.

I think that when implementing new solutions and technologies it is extremely important to firstly, make sure the technology is flexible and easy adaptable to new systems to be future-proof, and secondly to work with a good partner or collaborate with people that understand the topic and have the know-how, 

– Thomas Imhof, Apiax

Way forward

With business travel restarting in Asia in 2022, many client-facing employees may have had to re-familiarise themselves with many country-specific regulatory requirements. Digital solutions powered by market-leading knowledge and content providers have tremendously helped financial institutions improve how complex information is consumed and processed. Especially when it comes to improving experiences for the client-facing employees.

We see that in the Hong Kong region, RegTech—together with PayTech, and LendTech—are currently the three most adopted FinTech businesses and are predicted to remain so through to 2025. This development follows several supportive policies from the HKMA, such as a two-year roadmap to develop a more dynamic and diverse RegTech ecosystem in Hong Kong.

About Apiax

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