The Old Way to Compliance

Today’s manual compliance processes, even those managed by very smart people, typically take a large number of hours of a person’s time to gather required data from various systems, to interpret the applicable provisions of required regulatory documents, to map out required data fields, and to generate reports. These manual, error prone, time intensive processes, which create many inconsistencies, are costly to organizations, particularly when one considers the people time spent to implement the processes, and the potential fines for non-compliance, all multiplied by the number of different bodies that a company may need to comply with. With the growing number of rules with which organizations must comply and the rate at which these rules change, the need to automate as much of an organization’s compliance as possible is becoming greater.

And then, of course, there’s the cost of all of this – the salaries of the people who are taking value out of the organization by doing manual, non-value added compliance in spreadsheets, plus the risk of fines to the company and the damage to the company’s reputation due to non-compliance by the organization. As I’ve said before, most regulators are not lenient, so if a company is late with a filing or misinterprets a requirement, there can be severe financial and reputational consequences. As the rules are changing as quickly and as frequently as they are today, walking a tightrope is difficult enough – but it’s not sustainable.

The Manual Grind: More Than Just Tedious

The Manual Grind: More Than Just Tedious to Read – A Detailed View of the Bottleneck Caused by the Old Way of Compliance in a Company and its Various Departments to Ensure a Company is Complying with All of the Regulations Applicable to It in Order to Be a Productive Compliance Effort.

Furthermore, a manual compliance regime often lacks a clear audit trail, meaning that it is difficult to prove what has been done and how conclusions have been reached in generating any reports. For the greatest fear of any compliance officer is that of audit or investigation, and in dealing with a regime of this nature, there is always a fear that something has been missed, that a failing has been overlooked, and that in the fullness of time, this will be uncovered in a less than favorable light.

The Ever-Shifting Sands of Regulation

One huge problem faced by organizations trying to implement a compliance process within an organization is the issue of evolving rules or new additions to the body of current rules and regulations with which an organization must ensure that it complies. Rules and regulations are in a constant state of change. Often by the time that processes have been put into place for dealing with rules, these rules would have changed. Many organizations’ processes are comprised of many static, manual elements, which when combined make for a very cumbersome, slow and error prone process, for dealing with all of the different elements involved in the rules for compliance with the various relevant bodies (such as for financial services, regulatory bodies like the FCA and also for tax and accounting purposes, HMRC). New rules are constantly being introduced, and there are often amendments made to current rules and, therefore, there is little but to implement these changes in order to keep up to date with current rules, in a process that is akin to building a sandcastle on a beach while the tide is coming in – constantly having to re-build as much of the process as was previously completed as the rules change.

Regulations frequently change – they develop. As a result, there are often new rules that are added, and there are frequently amendments made to other rules. Therefore, the way in which a company can complete compliance for a particular set of rules, is not automatically going to be the best way for the company to complete compliance for another set of rules. This means that all of the time spent building a compliance system for a previous set of rules, is wasted as soon as that system of compliance is in place. Because as soon as new rules are introduced, a new system of compliance will need to be developed. This will require the same employee, who built the previous system of compliance, to be redeployed to build a new system of compliance. In the meantime, the company will continue to expose itself to risk of non-compliance. This is a huge problem, and it causes a lot of people a great deal of stress.

Enter the Hero: Your RegTech AI Platform

But first, let’s start at the beginning. A sophisticated regtech AI platform is not just another software product that a company can implement in order to add another layer of compliance functionality. No, a regtech AI platform is a completely different way of managing compliance and that is because the core of a regtech AI platform is based upon the artificial intelligence and machine learning at the heart of most modern software systems. This means that a regtech AI platform is able to automatically manage the tedious, error-prone and time-consuming tasks that form the backbone of any good compliance program. Therefore, with a regtech AI platform, you have at your disposal an army of super-smart, tireless, 24/7 assistants who will help you to manage your compliance on an on-going basis. It sounds like science fiction but it is not – it is here now and it is already making a huge difference to those smart companies that are embracing the change that a regtech AI platform brings.

There is now available software that enables a system to collect huge amounts of data from all parts of a business, read through complex wording of huge numbers of different rules and to map the information to relevant rules to then create reports of the relevant information in the required format and submit them to the relevant authorities on time. Such a system is no longer science fiction but is here today and is being used by organizations to improve their compliance as well as create a competitive advantage. Automated Regulatory Reporting and Compliance Monitoring using a regtech AI platform is more than just a tool to improve an organization’s compliance with all of the many different rules and regulations that have been put in place by governments around the world. It is a major business tool that can save an organization a huge amount of money and help to create a competitive advantage.

Automated Regulatory Reporting: No More Scrambling

Automated Regulatory Reporting is perhaps the biggest single benefit of a regtech AI platform for automated Regulatory Reporting and Compliance Monitoring. Reporting for compliance using manual methods such as spreadsheets for example, are typically the biggest resource drain and are a major cause of errors. By automating the process of reporting for compliance, such as gathering the data required for reports and then compiling the reports into the required format, the biggest cause of errors for companies are removed. Rather than spending days and weeks manually compiling reports, an automated AI system can complete the same reports in a matter of seconds. Once completed, a single click of a button can then send the AI generated report for compliance to the required body.

Automated processes for the preparation of reports for regulatory bodies minimize the same type of errors that are normally found in manually prepared reports. However, the greatest benefit of an automated RegTech process is that it frees up the time of a large number of compliance officers to be more strategic in nature. For example, rather than spending all of their time reviewing reports that have been created by a piece of software for compliance, they can review the reports in greater detail. They can look for trends that may give rise to future risks. The automation of the compliance process will allow the work of compliance officers to be much more effective. They will be able to develop their skills in a strategic number of areas and use their time more efficiently. The work that is created by automated processes will also be of a much higher quality. This will make it easier for any compliance officer to use the work in a variety of strategic tasks. The tasks could include monitoring of risk and making strategic decisions. As mentioned previously, the greatest benefit of an automated process is that it will allow the work of a compliance officer to be more effective.

Real-Time Compliance Monitoring: Catch Issues Before They Become Problems

This is where the ‘monitoring’ aspect of the regtech AI platform really comes into play, as opposed to the more traditional method of monitoring compliance on a regular basis. This type of monitoring only captures a single moment in time and could have gone wrong in the intervening period between checks. As part of the ongoing monitoring of the data, the AI powered regtech platform compares this against the relevant elements of the relevant rules. It identifies any instances of potential non-compliance or an anomaly.

Proactive Alerts and Insights

As the monitoring process for the AI is ongoing, it will identify any discrepancies or anomalies within the data, which could potentially result in a breach of a regulatory requirement. In such cases, the AI will automatically alert a compliance officer or any other relevant personnel within the organization, including an explanation of the cause for the detected anomaly, as well as the potential impact that it could have on the organization. The corresponding compliance officer can then investigate and rectify any potential problems in due time, before it is even detected by any of the relevant government regulators. In addition, the AI will also be able to provide great insights for the corresponding compliance officer with regards to the current as well as historical data. This will allow the corresponding compliance officer to obtain a much better understanding of the current trends as well as potential risks, that the organization might be facing.

Beyond Just Compliance: The Broader Benefits

In addition to some of the benefits for compliance, a RegTech AI platform offers a number of benefits to a company’s overall business. Some of the cost savings, for example, can be used to employ additional staff, or to redeploy existing staff to greater value. Furthermore, the reduced risk of a company that is utilizing a RegTech AI platform for Automated Regulatory Reporting and Compliance Monitoring can create new business opportunities. Data of greater quality also creates value for every department within a company. Therefore, a RegTech AI platform is a business optimization tool.

Automating the work that is currently being done by compliance teams saves a lot of money and frees up team members to work on more valuable tasks. The cost savings of a leaner compliance department can then be used for other investments. In addition, the risk of incurring penalties for non-compliance is dramatically reduced.

Monitoring continuously allows to find potential issues in real time, before they can become serious problems. Automated alerting immediately points out discrepancies or breaches of rules. Such alerts can be supplemented with explanations as to the reasons of possible issues and thus facilitate decision-making processes and enable dealing with problems in a timely manner. This will prevent possible infractions or non-compliance from being revealed by regulators, thus eliminating risk of severe fines for any possible infractions.

Accurate and up to date data enables individuals to make the best business decisions to help an organization such as understanding an organization’s current regulatory position, identifying potential risks and planning accordingly. This turns the drudgery of compliance into a business intelligence tool.

Choosing the Right RegTech AI Platform

Following this article we will discuss the criteria you should pay attention to while looking for the suitable regtech AI for your company.

When selecting the correct regtech AI solution you have to make sure that the solution is flexible and scalable and is able to support all kinds of regulatory requirements. The company as well as the regulatory requirements are constantly growing. The solution therefore needs to grow as well. In addition to this the solution has to be able to be integrated with the existing applications of the company, such as an ERP system or other applications. The integration should be as easy as possible and should not require a complete replacement of the current systems.

Next up, the quality of the machine learning: Will the RegTech AI platform automatically and correctly understand all of the very complex rules and (regulatory) text for fully automated reporting (and monitoring) or is the platform based on a more classic rule-based system that will require human input in the form of if-then-rules? And will the platform also include other AI-functions like Natural Language Processing (NLP) and/or (advanced) data analytics.

Thirdly, consider the user experience of the regtech platform. As it will likely be used by compliance staff, it’s crucial that the system is easy to use and offers a number of features to help make life easier. Users should find the interface easy to use and be able to access the information that they require quickly and easily. Clear dashboards will help users understand the information required for reporting, and good support is key if the system isn’t being used as expected. Finally, it’s crucial to consider the security of the system. As the platform will be processing large amounts of sensitive information, it’s vital that the system has robust security in place to protect users’ information.

FAQ

What exactly is a RegTech AI platform?

A RegTech AI platform is software utilizing AI and/or machine learning that supports a company in fulfilling their regulatory compliance obligations. The automated processes facilitated by the software relate to the reporting and the subsequent monitoring of the obligations that have to be fulfilled.

How does it help with automated regulatory reporting?

A RegTech platform with AI functionality first collects the relevant data required for a report, then it interprets the required regulations, and finally it maps out the reports that have to be submitted to the relevant bodies. These reports are automatically generated in the correct format and ready to be submitted. The time spent on manually completing reports is thus greatly reduced.

Can a RegTech AI platform really monitor compliance in real-time?

This platform can also monitor compliance on an ongoing basis in real-time, using current data including all new transactions to check for any breaches of rules or non compliance with any regulations. Alerts for any deviations or potential breaches are signaled to you instantly, so you can take action quickly, before potential problems have a chance to develop and cause damage, potentially over a period of days or even weeks.

Is it only for large financial institutions?

While many large financial corporations can benefit from a RegTech AI platform, other industries and company sizes are also possible. More and more companies from the healthcare and energy sector are, for example, working with RegTech. But also smaller companies and start-ups from the technology sector can benefit from the software.

Can a RegTech AI platform replace a compliance team?

A RegTech platform can free up a company’s compliance team from the time consuming work of inputting and inputting data in order to focus on higher value work such as interpreting complex rules and regulations, assessing risk and providing guidance and expertise to other parts of the organization.

How accurate are these AI platforms?

These systems are designed to be as accurate as possible, and are efficient for the management of compliance. They automate processes, which significantly reduces the possibility of human error. Also, the regtech solutions are continuously updated and improved when needed.

What is the biggest benefit from a RegTech AI platform for automated regulatory reporting and monitoring of compliance?

So this is the greatest advantage of a regtech AI platform for automated regulatory reporting and monitoring: it automates your reporting thereby eliminating stress and risk of error for you and your organization.

Conclusion

So there you have it, a ‘one stop shop’ of solutions that are currently available on the market to deal with the complex world of compliance in a rapidly changing world. There is a ‘RegTech AI platform’ that can deal with automated regulatory reporting and the monitoring of compliance. This will free up the compliance professionals in a company from dealing with complex, time consuming, tasks and allow them to focus on add value to the business in which they work.

Finally, we have reached the time where it’s enough to struggle with chaotic and costly world of regulatory compliance. Let’s move to the era of smart and cost effective compliance, by investing in RegTech AI, saving money, reducing your risks, and making your employees more productive. Let them work on more interesting tasks than just managing to comply with a large number of rules. Master the rules, not just comply with them.