New channels are constantly being added to your organization. Voice, email, text, and now probably mobile together with social media channels. Each one of those data sources is stored differently, has different protocols and different ways of accessing it. A genuine nightmare. The recent pandemic added another layer to that nightmare – employees are now working remotely. This is the real killer of any centralized analytical effort in your organization.
Electronic communications by their inherent nature are extremely unstructured and disorganized. Strong and robust analytical tools that are designed specifically for the complexity of communication-wording and text can handle any type of eComm data source, and even future-used comms. Moreover, the ability to detect financial context and correlate between the different comms (i.e. connect an email thread to a voice call or a group chat) could provide that end-to-end search and investigative edge with electronic communications data; putting manual processes to bed.
The current predominantly-remote environment that some say will take over Financial Services for good, is generating your organization huge risks, and opens the door to various market abuse scenarios especially in the current volatile markets, from Insider Dealing to Spoofing and Layering. You no longer have physical control over your once monitored employees. The next tip might sound like a futuristic dream but – stay on top of these scenarios and find ways to proactively prevent them. It might be too late After the fact.
The way FIs work and the way trades are handled drastically changed, we will start seeing a larger use of collaboration tools such as Teams, Slack and video conferencing tools like Zoom. That shift will require a change in policies for firms. Trades once delivered by phone will now be delivered by chat messages and the likes. While this might have a plus side to it including a collaborative compliance workspace, this should be considered a critical new weakness to address, nothing less.
With most firms moving to WFH policies and the possibility of a second pandemic wave next year; new channels, new ways of communications and new data sources are being heavily introduced. This innovation comes with an increased cost in storage and with a need to allow flexible infrastructure sizing, resiliency layers and enhanced security. While historically FIs refrained from cloud storage, some of the new channels will now require that from them.
All organizations, of all types and sizes, had to change the way they operate, this opens up great opportunities for innovation. Now is the perfect timing for intrapreneurs to drive change in their organization. Digital transportation processes will be accelerated and purchasing decisions will speed up. Make sure you avoid another point solution solving just one use case. Even now, amid a compliance storm, firms need to review activity and stay ahead of issues that resulted from a lack of supervision during home working. The ability to ingest and automatically analyze historical data and workflows is key here. To zoom in and capture exactly which eComms and trades took place throughout the pandemic storm is prevalent. This is where the strong, open to innovation, future-ready and agile firms will prevail.
Contact Shield for more details on the new eComms compliance normal
How does your firm accommodate transaction surveillance compliance in the current Coronavirus environment and are you prepared to ensure comprehensive compliance going forwards, considering future regulatory requirements coupled with home office capabilities?
In order to ensure robust compliance in situations like the one we are facing today financial institutions must consider how to achieve breadth in terms of the asset classes under surveillance while simultaneously maintaining the flexibility to adjust rules and alerts in accordance with changing market conditions. The following lists several considerations a financial institution should consider when reviewing current operations for MAR compliance.
There is still confusion regarding the surveillance of fixed income products – especially when it comes to illiquid bonds (99% of corporate bonds are deemed illiquid by ESMA). This confusion is typically associated with the fact that no market price is quoted in the same terms as for equities. However, the regulatory requirements are clear: All fixed income products (including cash and derivatives) falls under MAR and are subject to surveillance. Alternative detection models, therefore, must be applied.
Due to the nature of over-the-counter transactions, they have been the greatest challenge under MARII. Now that OTC instruments are traded through broker-dealer networks price developments in these instruments are influential on exchange-traded instruments. This opens the door for potential market abuse. Hence MAR requires systematic surveillance of OTCs traded through broker-dealer networks.
With FX derivatives already covered by MAR, ESMA is keen on including FX spot going forwards. Although FX spot is not yet regulated leading market participants are already capable of conducting robust FX surveillance. This requires a different approach to monitoring due to great volumes and different trading patterns thus requiring unorthodox detection models.
As market conditions change rapidly, so too does the surveillance requirements. Flexible and swift adjustments to detection thresholds becomes increasingly important in the face of market volatility. Providing compliance officers with the tools for this is key to maintaining compliance in times of uncertainty.
As markets show their volatility and personal trading volumes increase this can lead to an increased workload of compliance officers tasked with turning around pre-clearance trading requests of employees. Automated pre-clearance on certain assets, as predefined by the compliance function, is thus very valuable in already testing times.
Reconciliation of holdings by regulated employees is often a time-consuming task. By integrating the reconciliation and storage of accounts with a wider solution for managing employee trading the compliance function can achieve a degree of work-load insulation from the fluctuating trading activities of employees.
Today, financial institutions want to access technology and consume services quickly without needing to build and maintain physical IT infrastructure or acquire subject matter expertise in each application or technology stack. Managed Services in the cloud are not just less costly but also more accessible even in adverse conditions.
It has never been more apparent that on-premise compliance software brings along significant risks. The ability to conduct remote installations and upgrades is becoming a requirement to ensure that the software underpinning compliance controls can be deployed in an environment of conducting business from home.
Stefan Jørgensen
Nordics | FIS Scandinavia
Capital Markets – Ambit Asset Finance & Protegent (Market Abuse)
T: +45 33 93 90 90
C: +45 31 24 04 79
E: Stefan.jorgensen@fisglobal.com
Office: FIS Denmark, Havnegade 39, 1058 Copenhagen K.
Magdalena Glowacka
Business Solutions Consultant
Capital Markets
T: +44 (0)20 8081 2590
C: +44 (0)79 2025 1365
Business focus has moved to remote operations as markets are navigating the current crisis. As your organization aims to respond and adapt to the new working conditions, it is vital that your business navigates these challenging times without compromising a focus on compliance and process adherence – no matter how unusual the times we find ourselves in. The following 5-point action plan can help you weather the storm and tackle business continuity in a compliant way:
As you build your BCP, ensure that you factor in how you will manage compliance remotely, what security will look like and how you will continue to meet your obligations in these unprecedented times.
This is especially true when your workforce is working remotely. Implement the right tools to meet voice and eComms recording and monitoring requirements even when your staff is using enterprise UC, collaboration, messaging and trading communication tools to perform their daily tasks from home or alternative sites.
Automation can significantly ease the burden of expanding and often stringent and demanding regulations. It can free up skilled staff from low-value, repetitive tasks and improve reliability amid the constant change of personnel, infrastructure, data, and policy. Automation is key to managing operational risks related to managing complex communications and call recording environments.
This will help you manage the risk of conflicts of interest, unwanted disclosures, insider trading and data breaches caused by unsupervised activities and weaker control over employee conduct.
Regulators expect you to continue to comply with all laws and regulations that apply to your business. Remind employees that supervision, surveillance, archiving and enforcement of policies will continue in order to retain customer and transaction records, ensure data privacy, and maintain transparency and accountability around trading activities – no matter the circumstances.
Learn more on transforming compliance with Verint
It’s fairly common for compliance staff involved with daily regulatory transaction report submissions such as EMIR, MIFIR and OTC Derivative reporting to occasionally work from home or remote locations. But COVID-19 has brought new challenges with entire offices working from home. To ensure transaction reporting continues smoothly, we gathered a number of key points firms can review.
For security purposes, ARMs and Trade Repositories restrict access to submission folders to whitelisted IP addresses. As these are usually office locations, compliance personnel working from home need to ensure that they can still access these folders either via VPNs or requesting new IPs to be added. Heads of Transaction Reporting are responsible for ensuring that everyone who needs access to submission folders can when they work from home.
Whether it’s internet problems, kids at home or illness, the current work from home environment means you can expect staff not to be 100% available to follow their usual reporting routines. As such, investment firms should have a prepared structure in place of who is responsible for each reporting activity and who is their backup.
Transaction reporting requires dynamic updating of reference data for new products and counterparties. Updates can be made automatically as data is pulled from an OMS or manually inputted. However the process, it should be reviewed to ensure that data continues to be updated correctly and in time.
Control and reconciliation tools provide lots of value during current times. Recon tools can identify if certain trades aren’t being reported. While control tools can identify why submissions are getting rejected and what needs to be fixed.
Over the last few months, due to COVID-19, SFTR and new report obligations in Singapore have gotten postponed. In addition, publish dates for RTS data under MiFID II have been pushed back. Also, various regulators have issued guidance that investment firms should update them about any reporting problems they are having. As such, companies need to have a process in place to handle their two-way communications with regulators.
Before COVID-19, most regulators required firms to have a business continuity plan (BCP) in place. An example are requirements under SMCR that was initiated by the FCA last December. With COVID-19 putting these plans to test, firms should document what part of their BCP worked and what didn’t. This will make it easier to review current plans and adapt them when things get back to normal.
Contact Cappitech to learn more
As the COVID-19 pandemic took hold, global financial regulators moved to keep pace with the evolving situation. Many regulators have pressed pause on consultations and significant upcoming developments, to ease the regulatory burden on firms. There has, however, been a slew of guidance from regulatory bodies concerning COVID-19 and their expectations as a result. Regulatory change stops for nothing and it is likely that regulatory change will peak towards the end of 2020. Firms should take heed and ensure they have effective systems in place to horizon scan and track, evaluate and implement regulatory changes and renewed implementation dates.
As well as inspiring a quasi tech-revolution, COVID-19 has had a marked effect on the make-up of the workforce. In some instances, coronavirus has seen team numbers dwindle. More commonly, staff members are working from home in unprecedented situations, which can create increased risks as well as more room for mistakes and misunderstandings. Now, more than ever, businesses should be looking at ways to automate their compliance systems and implement smart, technological solutions that reduce human error, free up resources and allow individuals to focus on valuable tasks such as implementing effective regulatory change.
The circumstances surrounding COVID-19 – working from home, less face-face interaction and general uncertainty – have led to a surge in cybercrime activity. Cybersecurity should be high on any organization’s agenda, but especially for financial service firms where large quantities of money and data are at stake. To avoid eye-watering regulatory penalties, firms should ensure that they are properly tracking any changes to the cybercrime agenda; that they are implementing these changes effectively; and that all staff are properly trained to spot and manage cyber-risks when they occur.
Many institutions are busier than ever in the wake of COVID-19 as they grapple with new circumstances and situations. Some, however, may find themselves with time on their hands as business dwindles for a period. Now is the perfect time for firms to take stock of their compliance systems and expose any holes or inefficiencies. Are they continuing to use first-generation tools that fail to keep up with modern-day demands? Are they ensuring operational effectiveness? Is working from home more effective than working in an office? Firms should use downtime to assess their current standing and make effective business continuity plans for the future.
As the world moved to working from home, the importance of cloud-based technology became indisputably clear. Cloud-based systems allow for joined-up ways of working, ensuring connectivity across systems, controls and employees; resulting in increased operational effectiveness – from the compliance team to the C-suite and everyone in between. Firms should be looking to the Cloud for adaptable solutions that can be used at-scale to meet business needs as they fluctuate during uncertain times. Moreover, Cloud-based compliance solutions offer ease of implementation, taking significantly less time and resources.
While global regulators are allowing a degree of flexibility in the way that firms meet their regulatory obligations, they still want to see that firms have done all they can to remain compliant. Controls will still need to be applied, but in a more creative, thoughtful way. This is especially true of record-keeping, where existing systems may be ineffective or impractical in a work-from-home environment. Unwarranted or indolent non-compliance will inevitably be called out by the regulator. Firms need to get creative with their solutions – if they can’t meet regulatory obligations in the usual way, they should find a new way.
Contact CUBE to find out more
Executive Summary
A survey of international financial institutions was conducted to find out the impact of COVID-19 on regulatory operations.
The wider more stringent “lockdown” measures in Asia, and the difficulty for most personnel of large Business Processes Operation (BPO) centers in India to work remotely has resulted in a greater impact in managing and facilitating regulatory processes and controls in these regions.
Ireland appears to be one of the countries least impacted by COVID-19 and the subsequent lockdown. This appears to be due to well-timed, stringent, and well tested Business Continuity Plans being put in place. The UK and the Netherlands also fared well due to a wide ability of regulatory and operational personnel to work remotely.
The majority of the respondents said COVID-19 had a negative impact on the process of client onboarding and KYC refresh. Regulatory reporting seems unlikely to be affected.
Introduction
Lysis Financial has researched the impact the coronavirus COVID-19 has had on regulatory operations within the financial service industry since March 2020.. The survey was distributed globally to people working in regulatory operations and compliance departments within financial institutions.
Geographical Reach
The respondents of the survey are Europe based, with most coming from the UK, Ireland, and the Netherlands. Broader participants are located across East Asia, India, and the Middle East.
Impact of COVID-19 ON Regulatory Operations
Business Continuity Planning
Remote Working & Processing
Risk Assessment & Regulatory Reporting
Training
20% of respondents said the financial crime compliance training programme has or will be impacted by the COVID-19 lockdown.
How We Can Help
Lysis Operations is currently supporting our full client-base remotely with short or long-term KYC processing for customers. We have a team of experienced analysts who can manage KYC and CLM operations globally and are available immediately.
Our analysts are able to work remotely on secured networks and will ramp up your production to Business As Usual processing levels with short lead times. Our KYC teams are supported by our highly experienced Operation Managers and AML Subject Matter Experts and the initial learning-curve for each new customer’s policies and procedures is supported by our Lysis Academy.
We also operate a full end to end AML managed service covering all elements of the client lifecycle, including onboarding, KYC refresh, ongoing monitoring, offboarding, and AML transaction monitoring.
The service utilises established, industry infrastructure, that is implemented, managed and maintained as part of the service. We can configure the service to your specific risk appetite and policy requirements to ensure a bespoke solution that fits your organisation.
If you would like to discuss how we can help your firm deal with the current situation and way forward and ensure regulatory requirements are met, then email info@lysisoperations.com
About Us
Lysis Group delivers a unique combination of expert consulting, managed services, training, resourcing, and an innovations lab in Financial Crime Compliance (FCC) and Client Lifecycle Management (CLM). We provide these services to financial institutions including wholesale and investment banks, wealth managers, challenger banks, payment service providers, and organisations from a range of other regulated industries including real estate.
With this unique, interconnected combination of services, deliberately chosen to compliment and strengthen each other, Lysis creates a unique differentiation from other providers in the market.
Learn more
Before COVID-19, onboarding- and KYC processes often still required physical presence and volumes of paperwork, making it a frustrating and time-consuming process. With COVID-19, more banks and financial institutions have turned to digital approaches in order to continue onboarding customers from home without breaching lockdown regulations. Cloud-based and API enabled technologies, such as Blanco’s, offer a powerful solution that brings limitless flexibility and advantages over traditional processes. To ensure that digital onboarding remains a less-cumbersome experience in COVID-19 times, we’ve collated an onboarding and KYC ‘checklist’ to refer to.
European legislation, such as the AML Directives and eIDAS Regulation, establishes the regulatory framework for digital KYC/AML processes in Europe. This framework enables the adoption of innovative technologies for the process of contracting new services and opening accounts completely online and securely. For example, with hybrid onboarding, asset managers are able to digitally vet their clients and send onboarding prior to meeting clients via video conversation. In this manner, a physical process has been transformed into a digital one, making it ‘phygital’
Financial institutions are enthusiastically embracing disruptive and innovative technologies due to their efficiency and lower costs. For most financial institutions, developing their own onboarding and digital KYC-flow requires too much time and attention away from their core products. Blanco’s KYC Suite solved this problem by building a user-friendly fully web-based digital onboarding platform, which can be used by both clients and the onboarding team of a financial institution. Enabling self-onboarding allows customers to complete onboarding within a few minutes rather than hours, offering efficient and pleasant customer experience. SME customers can also easily upload additional information via a user-friendly interface, updating and organizing data like shareholder- and UBO-information themselves.
The use of a predefined flow increases the completeness of data since it is not possible to push on with the onboarding process without completing the necessary information. Digitalizing the onboarding- and KYC process with an obvious intake procedure, structured interface and consistently based on the same steps means managing multiple customers becomes a parallel process. Collecting and processing data is facilitated, with automatic contract generation, easy PEP- and sanction list checks and digital signing of contracts or other important documents.
The easiest way to save on compliance costs is to activate the digital channel; this is also the expectation of your clients nowadays. In our digital age, clients expect efficient onboarding through multichannel setups: mobile and web interfaces. A fully digital client file is easier to maintain and therefore cost efficient. Continuous monitoring through digital platforms means that onboarding- and KYC processes remain fully compliant, efficient and cost-effective on a continuous basis. Using technology to serve people’s lives brings efficiency and lowers costs, creating a symbiosis between man and machine.
Learn more about Blanco
Unprecedented demand from SMEs has made scaling and digitising your processes to stay compliant more essential than it’s ever been. It’s no longer a choice, it’s a necessity. At DueDil, we look to proactively support both the UK SME economy as well as the financial institutions during this uncertain time.
The Coronavirus lockdown has had a profound effect on millions of companies across the UK with a big drop in new company registrations and 1000s of companies applying for loans under the government’s Coronavirus Business Interruption Loan Scheme (CBILS). This has put a lot of pressure on lenders. The government has tasked them with distributing billions of pounds to SMEs in a matter of weeks. All while sticking to the normal compliance and risk procedures that, while essential, can delay decisions. Many financial institutions still rely on outdated technology – making decisions using spreadsheets, PDF forms or asking customers to call their local branch. FinTech companies have the ability and desire to help SMEs, but to respond to a crisis the size of Covid-19, it requires partnerships between FinTechs and banks as well as other financial institutions. In the longer term beyond Covid-19, we need to see the industry as a whole stepping up to deliver the kind of fast, digitally native products to SMEs that some are already offering.
Ultimately, the challenge of disbursement of the loans is passed on to lenders in the UK. Traditionally, financial service institutions relied on paper applications, in-person interactions and physical branch networks. This could be one of the biggest reasons as to why we are currently seeing a delay in loan disbursement. This poses a further threat to the economy’s well-being. This situation forces the financial services industry to make a giant leap forward in adapting technology and becoming fully digital, from end to end. We should also not forget that banks have to make tough decisions when considering loan applications. To make the right decisions, lenders need to balance the urge to provide loans by taking on too much risk. Understanding the long-term health of their portfolio is on top of the agenda for financial institutions. They need to understand the context around each entity that applies for a loan to be able to make the right call. This is where company insights can make a significant impact by providing the full picture on the business in question and helping financial service institutions to make a more informed decision about the potential risk. Banks are enabled to achieve greater automation of compliance checks by injecting company and industry insights into their decision-making processes.
DueDil’s company insights give financial services organisations the clearest view of the risks associated with a company, its group structure and ultimate beneficial owners. For example, the impact of Covid-19 has varied from industry to industry, with companies in certain sectors hit much harder than most. It is important for the financial providers to understand the impact that pandemic has on the various sectors and make adjustments to their strategies and operations.
Get in touch with DueDil to find out how you can reduce friction by boosting automation of your compliance processes.
Get in touch with DueDil
The Covid-19 pandemic and its subsequent lockdown across the globe has resulted in a huge drive towards digital channels. Banks, fintech’s, retailers, digital content and gaming operators have seen an upsurge in demand and traffic to levels they have never historically experienced. In regulated markets, the need to identify customers and businesses in line with AMLD5 and/or local regulatory guidance is further challenging as many have historically relied on physical relationships and documentation in order to onboard customers of their services.
In the new-norm, institutions need to embrace the digital opportunity in driving efficiency in on-boarding times, cost and customer experience without compromising risk. Automation of the onboarding funnel is crucial, firms should be able to onboard customers within a few seconds and then provide ongoing AML and Fraud monitoring. A strong Workflow Manager engine can help compliance derive more intelligent and richer decisioning to determining good and bad actors, this is crucial given the threats from data breaches over recent years with hundreds of millions of identity credentials being traded regularly by criminals in cyberspace.
Once a customer or business entity is on-boarded, and where appropriate, UBO’s identified and verified the importance of ongoing account and transaction monitoring is a crucial process to manage the financial crime environment. In the new world of on-boarding more customers digitally there will be greater risk posed on institutions, more cases could slip through the net as firms get swamped resulting in higher cases of fraud or even higher levels of customer declines. Leveraging data insights from innovative technologies as well as sophisticated tooling to track a customer or entity through its every interaction helps to remove silos and enhances customer profiling.
Over the years innovations in digital risk management have grown exponentially, technologies such as Device Fingerprinting, Email and Mobile profiling, address validation and cleaning, geo-location, multiple identity bureas across the globe as well as AML and Watchlist technologies coming together provide a richer view of a customer or entity. In addition to data capture and processing, it is important to leverage visualization to determine risks, performance blockages and data quality to ensure you focus on the hotspots first and prioritise your compliance and fraud management processes as appropriate.
Recently Gartner introduced discussions around the role of orchestration for identity and fraud management. Connecting to APIs is a vanilla capability most competent developers can deliver with minimal fuss, but when you leverage swathes of data points from multiple 3rd party APIs to enable complex compliance decisions it can only really be effective through close collaboration and subject matter expertise.
Today through Sphonic and a single, bespoke API you can access insights on over 5.4bn consumer identities, 365m business entities, 7bn unique devices and covering over 200 international markets, this means there should never be a missing piece of data to manage your risk or on-board customers efficiently. Learn more about Sphonic and our customized collaborative platform to solve your compliance challenges in the Post COVID era.
Learn more about Sphonic
Regulatory, business and risk-related changes have always been the biggest challenges for Compliance. Organisations have always struggled to adapt to and implement changes in time due to the sheer number of changes impacting their businesses. COVID-19 highlighted that without a systems approach to Compliance, it is extremely difficult to cope. With global organisations having to switch to working from home in every office around the world, compliance and operational risk teams struggled to keep up with daily updates and evolving governmental guidance in every office. But it’s not just assessing the impact daily that has been challenging. Communicating changing circumstances to employees and making sure they get the necessary information quickly proved to be a mammoth task. Cyber risk teams had to react at an unprecedented pace as every employee was told to work from home and ensure that they follow the organisation’s security policies.
Companies that have global and centralized policy management and regulatory change systems have been able to cope and adapt to new circumstances much much quicker. The new normal exposed that systems that provide real-time collaborative working, reporting and audit trail of all decisions around changes in policies, obligations and impact assessments are the future of work.
Define your organisation’s Policy Management maturity level:
1. AD-HOC
2. FRAGMENTED
3. DEFINED
4. INTEGRATED
5. AGILE
Evolve with compliance!
Covid-19 certainly changed the way the world worked, forced complete digital adoption and yielded significant changes to operations and compliance processes. It revolutionised the trajectory of business operation and opened the doors for organisations to function collectively, yet in a decentralised manner.
This downtime does not signify a pause in operation nor regulation, but rather a time for organisations to review their operational efficiencies as we undergo a true compliance revolution. In our 7 point strategy, discussed in an episode of the RegTech Report Podcast, we look ahead and provide projections for the future of business and compliance.
1. Automation within compliance
Digitalising compliance processes is going to be a fundamental aspect to business success going forward, as it will help organisations scale and react quickly, as well as appropriately – both with internal and external stakeholders. In light of recent events and especially with the new ways of remote work and physical distance, this is extremely important as key personnel and the subject matter experts may not always be as readily reachable as they were before in a typical office environment.
2. Cloud-based computing for scalable solutions
When the crisis hit, most functions within the organisation were forced to work remotely and it showed the world that on-premise solutions sported a series of downfalls. Looking ahead, it’s unlikely that all businesses will resume a full five days per week office setting, and workforces will continue to operate and improve on their remote working cultures. Smooth future-orientated operations may be extremely challenged if the organisation continues to rely on on-premise software. There is no better time than now for institutions to adopt scalable, cloud-based solutions.
3. Ensure vendors and suppliers are equally compliant and reliable
Third-party and supply chain risk has heightened and organisations need to actively be reassessing relationships and reliance in order to get a true picture of the ever changing vendor-risk profile. Many organisations were made to prioritise new third-party relationships in order to integrate into the new way of working, fast. Supply chain priorities adapted and certain inventory and supplies instantly became on the critical path in order to enable an organisation’s entire operation. Going forward, it’s important to ensure that your vendors and supply chain is geared toward the future and are regularly critically assessed.
4. Sustainability risk management
Pre-covid, we noticed rapidly emerging trends around more structured sustainability, reduction of your organisation’s carbon footprint and better management of real sustainability risks. This awareness for sustainability is a trend that has now been amplified and will likely become a large new component of compliance and regulation as a consequence. The future calls for a big need for smart thinking in this space in order to make sustainability management transparent, measurable and actionable.
5. Operational Resilience – Reassess your strategy for continuity
In a recent IRM survey, 90% of companies plan on revisiting and updating their risk management and business continuity plans for the future. This is a sure indicator that companies realise now, more than ever, the importance of risk managers, as well as revising scenarios, potential risks and measures that should be tested within your business continuity plans. Essentially, it is important to find resilience and maturity in your risk management because as the saying goes: if you fail to plan, you plan to fail.
6. Compliance doesn’t have a pause button
Compliance processes cannot stop, even when other operations within your organisation might. New methods need to be established that enable processes to carry on and it is tremendously important for business leaders to find resilience in the compliance process and turn any current weaknesses into strengths. Enterprises are challenged now more than ever to adapt quickly to change, because many of these changes are here to stay.
7. Collaboration & Communication
With the physical distance between co-workers, it is certainly a challenge to ensure that communication remains succinct and that strategic collaboration remains as productive as possible. Collaboration tools and efficient communication is extremely important with remote teams, which will likely for many organisations, become the new normal. This goes much further than just implementing a good communication culture within your workforce, but it means adapting your Control framework to a new style of work that promotes healthy collaboration and communication.
Alyne provides guidance along with simple and actionable controls for your business to meet requirements defined in many leading standards such as the ISO 27000 group for Information Security Management, ISO 31000 group for Risk Management, ISO 22300 for Business Continuity, the NIST Cybersecurity Framework, COBIT 2019, COSO, PCI DSS and more. Using Alyne’s control statement library provides an easy way to demonstrate maturity of your organisation without the typically high cost of hiring subject matter expertise. Keep your organisation at the forefront of Cyber Security, Risk Management and Compliance with Alyne as your mission control.
Listen to the podcast episode discussing our projections in more detail.
Or
Learn more on transforming compliance with Alyne
COVID-19 affects many companies around the world, and financial institutions are no exception. Recently, we have learned that one of their main concerns is business continuity in compliance.
In the current situation, many financial institutions, from global universal banks to local private banks, are challenged in their ability to keep their compliance units operational.
From what we have learned, companies are finding it difficult to continuously provide compliance expertise to business units as compliance teams move to remote work – often for the first time ever – and team availability is becoming increasingly challenging.
We find that companies need a combination of the following elements to maintain business continuity of regulatory compliance in times of crisis: tools to digitalise their compliance knowledge and a way to provide their organisations – especially business stakeholders – with easy access to this compliance know-how.
In a digital format, compliance expertise becomes independent of the compliance teams, ensuring availability even if the teams are temporarily unavailable or resources are scarce.
To date, most financial institutions struggle to provide their compliance knowledge in digital form because they generally do not have the tools to translate their compliance expertise into digitally accessible rules.
Legal & compliance teams still work with manual solutions to provide their expertise, relying heavily on paper-based manuals, written policies, and compliance training. In the current situation, the value of digital collaboration tools has become blatantly clear.
We urge our community to examine these issues and use the current situation as an opportunity to reflect on their ability to provide compliance services in times of crisis.
In a few months, banking will not be the same anymore. The financial industry sees a boost towards digital right now, which affects key processes. For many of these processes, legal & compliance rules are the foundation. Now is the time to support these developments with the right regulatory technology.
We are proud that the ability of our customers to meet regulatory requirements has not been compromised in recent weeks.
You can not predict the future, but you can prepare for it – in this sense, we hope that this gives a positive note in an otherwise difficult situation.
Visit the Apiax website
Cash and the Pandemic:
COVID-19 has affected money itself, prior to the lockdowns cash was able to flow freely and transactions were made with impunity, money moved in vast quantities as fast as networks would allow. Now, with millions out of work, transactions have slowed down and cash is no longer a significant market force. That will likely change as lockdowns ease up, but nobody is interacting with money the way that they used to.
Vulnerable People:
COVID-19’s impact on overall economic activity is also likely to be providing new opportunities for financial criminals to launder funds. Unemployment is already at high levels in many countries; in the US figures recently reached 40 million unemployed, and in the UK it’s at 2.8 million. This creates a large pool of economically inactive – and historically well-behaved – citizens that could easily be targeted to act as money mules in the laundering process.
Social Media and Financial Crime:
It’s also worth considering the vectors that make many money muling opportunities available to individuals. Social media is the most prevalent at the moment and compliance teams need to be aware of scams coming from these channels that are targeting innocent people who may be more willing to take on risky activity for financial stability.
Transactional Behavior:
Cash transactions are currently unwanted by many legitimate businesses. Online purchases are at a historic high in many countries. Because of these significant changes to how we are using money, there also needs to be changed in how businesses ensure money is being used in a legitimate way – a genuine purchase, say, rather than a scam, fraud, or evolving money laundering technique. That is the role of compliance, and it needs to adapt to a socially distant world.
Fraud is Everywhere:
Scams and cons have also cropped up thanks to the pandemic, often focused on the copious amounts of cash made available by governments to cope with the crisis. The growth of such funds – often under relatively loose control – have made defrauding the public finances a more attractive opportunistic proposition.
Cybercrime Increases:
Arguably the biggest growth area for crime during the crisis has been cybercrime, which has been on the rise throughout the lockdown period in the West. Ransomware attacks have been an unfortunate reality for the lockdown. Much like cybercrime in general, it’s a criminal industry that’s projected to have high growth as the digital transformation of business increases and we become more technologically-dependent.
The Pandemic and Fintechs:
Fintechs have had varied reactions to the pandemic, some, such as Wirecard, have gone into insolvency, although that was due to non-pandemic related reasons. Amongst those who have so far survived, many have had to drastically reduce employee numbers or cut senior staff salaries.
After the Pandemic:
Criminals are not going to simply give up profitable new avenues of criminal enterprise, especially if we’re subjected to further lockdowns. There is plenty to learn from the crisis already, and businesses and their compliance teams will benefit from learning these lessons now. Knowledge and preparation will be vital for the near future.
Learn more about ComplyAdvantage
Across the globe, financial services organisations have had to adapt due to the pandemic. While remote working has arguably hit firms harder when they have been more reliant on legacy systems and manual processes, even the most digitally enabled firms have been affected.
Covid-19 has accelerated digitisation in many areas. The financial services industry as a whole deserves plaudits for the way it has pivoted to keep in contact with customers during the pandemic. By embracing telephony and video calls, they have kept in touch with customers who themselves are going through extraordinarily difficult times.
While firms have been swift to up their game in communications, the wider infrastructure around areas like compliance, customer care and security are often lagging behind. Indeed, there are a lot of firms in the sector who have tackled the first challenge of remote working but are now starting to appreciate the longer-term risks facing them.
The remediation risks posed by the pandemic:
1. More inbound enquiries than ever
Covid-19 has led to a surge in new enquires. Customers struggling financially are seeking mortgage repayment holidays, changes to loans, clarification of agreements and all manner of other issues caused by these challenging times. The sheer number of calls this generates is a serious logistical challenge for firms to handle, even if remote working wasn’t in place.
2. Constantly shifting regulations, policies and products
Regulators, governments and financial services organisations are constantly changing products, policies and regulations in a bid to safeguard end customers. While this is to be applauded, it makes life difficult for frontline staff who must work twice as hard to ensure the advice they are giving is suitable in a rapidly changing environment.
3. Staff are being transferred to frontline positions to deal with these numbers
This is exacerbated by many organisations needing to divert internal teams from back office roles to customer support functions to deal with the swell of enquiries. This will often take staff out of their normal comfort zones and require them to swiftly learn new polices and processes.
4. Lack of office environment risks decline in culture
Working in the office, staff have more access to managers while supervisors find it easier to check-in their team’s performance and ensure advice being offered is suitable. Remote working has made this more challenging, which means team culture, QA and training all suffer.
5. Communication channels are not being recorded
While firms have typically done well to stay connected to their customers, this has often been a scramble and important measures have fallen to the wayside. Many firms still aren’t recording all customer meetings remotely let alone using smart technology to analyse these conversations for analytics and automations further downstream.
Add all these together and the financial services industry is facing a very real threat of future remediation scandal. With the perception that regulators tend to side with complainants when audit trails are ambiguous, firms must recognise that offering suitable advice is harder than ever, they often lack the infrastructure to measure QA remotely and the lack of conversation recording means there is a vulnerability of future regulatory fines even in instances where no mistakes were actually made.
What role can RegTech play in addressing these challenges?
1. Comprehensive audit trails
Keeping an audit trail which covers all major communication channels is now more readily available than ever. This is essential for building hybrid models capable of encompassing both the office environment and remote workers. Consider solutions that also help to manage these records at scale, for instance, automatic adding of metadata to speed up search and retrieval in reviews.
2. Efficiency in reviews
Every hour of conversation can easily take three hours to review manually, and written documentation can quickly hit an unmanageable word count. There are a growing number of solutions offering ways to break down this data at scale and automate key parts of the review process. Random sampling and lengthy past business reviews are increasingly becoming a thing of the past.
3. Culture
A positive culture is essential, but encouraging it through remote working is a challenge. Regular team meets and 121 sessions between advisers and managers can help replicate the office environment and increase levels of support within teams. By recording client conversations, managers also get a means to supervise meetings without needing to sit in the same room enabling them to keep their finger on the pulse and promote good conduct.
4. Customer care and complaints reduction
A lot of complaints are caused or exacerbated because of failure to harness the correct information or deal with matters quickly enough. Firms should be exploring CRM tools and other ways to get all the information they need readily available to improve customer care, deliver better outcomes and reduce complaints.
5. Risk management
There are a growing number of smart, AI-driven risk management tools that help firms respond to issues before they escalate into issues. For instance, Recordsure is often used to spot anomalous patterns in conversations which could point to a compliance risk such as a recommendation that has been made by an adviser before they have conducted the necessary research. New innovations like this are reshaping the way regulated firms approach their risk management.
RegTech is more important than ever in tackling these issues. While the pandemic has been an agent of change for most organisations, in most cases, it has accelerated changes that were already happening rather than creating entirely new issues. Leaders should be looking longer term at the new normal and devising digital-first strategies that support their staff catering both to their traditional values as well as the need for hybrid solutions that integrate the office environment with remote working.
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