This April, the FCA announced it was further putting digital conduct in its crosshairs and in its business plan for 2020/21 announced its priority would be ensuring consumers are “offered fair value products in a digital age”.
But what does this mean in practice?
Essentially, this comes down to the issue of accountability over a financial services firm’s digital estate. What content is being published on the website? Which offers are being communicated via social media? Is the wording, imagery, tone or disclaimers compliant?
This all accounts for a vast amount of data and how regulated firms operate digitally has a huge impact on the information they display and communicate.
With so much data to cover, RegTech solutions are now being increasingly turned to by already-stretched compliance teams. And this compliance needs to be evidenced.
So to demonstrate compliance, more firms are using monitoring and retention services to capture all assets and verify obedience at any given time.
The need to do so will become more prominent next year, as the FCA looks for more transparency in markets, meaning firms will need to increasingly engage with RegTech providers.
“The FCA Financial Crime Guide clearly recommends that financial services providers ‘conduct ongoing monitoring of its business relationships on a risk-sensitive basis’,” said Justin Fitzpatrick, co-founder and CEO of DueDil.
“Today, too many firms struggle to comply with the spirit of this rule as it was written due to outdated or inaccurate customer information and legacy technology.”
Furthermore, the FCA has stated that market abuse during this time will not be tolerated if breaches occur while firms practice remote working.
“I understand why it is often tempting for firms to look purely to the behaviours described in recitals in the Market Abuse Regulation (MAR) or to utilise ‘out of the box’ alerts from certain technology providers,” said Julia Hoggett, the FCA's director of market oversight in a recent speech.
“However, whilst that may provide assurance that you have followed a process, it may not provide assurance that you have effective controls in place to mitigate the risks that you actually face.”
Which again underlines the importance of evidence. Complying with the rules is one thing, but financial services firms increasingly have to be able to show they are doing this.
“This has been a consistent theme for a while now,” says Sam Roberts, MirrorWeb’s head of digital marketing. “There are now so many facets that financial services companies, in particular, are struggling to keep up with it. That’s where RegTech companies come in.”
Using website and social media archiving software, firms can keep organised records of all digital activity to protect them against scrutiny from regulatory bodies.
MirrorWeb uses specialised crawl technology it has designed in-house to scour entire websites and social feeds in minutes, creating immutable and legally-admissible records of these digital estates.
Not only are such records 100% accurate and tamperproof, they include all dynamic data and can be revisited at a later date as it the archived website was still live. This kind of technology delivers a powerful benefit to compliance teams that already find themselves stretched.
Roberts believes there will be heightened competition in the sector as the pandemic accelerates digital transformation across all industries.
“There is going to be an increased focus on what you communicate as a firm and the use of tech is going to be much more prevalent; both from the regulator side in their ability to conduct surveillance and from the tech companies that will be trying to keep abreast with everything that is changing,” he adds.
The challenge of juggling current risk assessments with navigating a new regulatory landscape will be a huge concern for organisations from the very start of the New Year.
And with so much data to remain accountable over, RegTech solutions are likely to become more widely used in an industry already as heavily regulated as financial services.
A report published in November by Cappitech suggests that organisations are planning improvements for “better data quality, enhanced reporting knowledge and expertise, prioritising reporting processes and efficiency and enhancing Completeness, Accuracy and Timeliness (CAT) reporting”.
“We expect to see a trend in this direction, as regulatory technology providers catch up with demand." says Camilla Winlo, director of consultancy services at DQM GRC.
"Vigilant Software’s CyberComply has been designed to integrate ISO 27001 and data protection requirements so it gives a clear view of overall privacy and information security risks - but in general regulatory technology is currently highly specialised and has limitations in its ability to provide a true picture of risk across a whole domain.”
In September, the Consultative Committee of Accountancy Bodies (CCAB) released its updated anti-money laundering (AML) and counter terrorist financing (CTF) guidance. Reflecting the changes made to the UK’s Money Laundering Regulations the guidance permits and promotes the use of electronic identification and verification systems where certain criteria are met.
“This is a major step forward in the fight against fraud and money laundering as criminals are becoming increasingly clever in exploiting gaps within financial systems,” says Jane Jee, CEO of Kompli-Global.
“There is regulatory technology already on the market that makes the onboarding of a client simpler and easier because it does the heavy lifting, while human analysts use their AML expertise to offer the right information at the right time to the accountancy firm.
“By using such technology, accountants now have the most up-to-date and complete information to support its decision making whilst meeting its regulatory requirements. This is something I believe will become of increasing importance into 2021 as accountancy firms navigate both the complexity of the pandemic, as well as the innovative ways that criminals develop to exploit their systems.”
Where is this taking financial services?
We recently produced a free-to-download white paper on the digital trends facing financial services this year, from the use of tech by regulators to the operational challenges now posed by working-from-home setups. You can grab your free copy below to learn more about this fascinating period the industry now finds itself in!
This article first appeared in bobsguide on 2nd December 2020 by Beth Mason, and can be read in its original entirety here: https://www.bobsguide.com/guide/news/2020/Dec/2/compliance-tech-supporting-uk-financial-services/