• Avril Brenda Chan

RegTech: The Future for Compliance

Issues Faced by Businesses

Businesses all around the globe are facing the problem of compliance and adhering to regulations, this is especially evident amongst financial institutions. In a report released by Fenergo, it was reported that global penalties had totalled up to $36 billion for non-compliance with Anti-Money Laundering (AML), Know your Customer (KYC) and sanctions regulations. Furthermore, in July 2020, the Money Authority of Singapore (MAS) imposed a severe penalty exceeding 7 digits, $1.1 million to be exact on Asiaciti Trust Singapore Pte Ltd (ATSPL) for its failure to comply with MAS’ Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements. Evidently, compliance is an issue faced by businesses all around the world. This lack of compliance can be attributed to the lack of knowledge as well as carelessness of businesses.

In Singapore, the Payment Services Act (PSA) was introduced in early 2019. This was put in place so as to enhance the regulatory framework for payment services so as to strengthen consumer protection as well as promote confidence in the use of e-payments. However, many businesses are still unfamiliar with the new regulations being imposed through this act, resulting in non-compliance. Additionally, carelessness due to human error can also cause businesses to be non-compliant. It was found that 9 out of 10 alerts generated by traditional AML monitoring systems tend to be false alarms. These alerts often have to be manually scrutinised and reviewing large numbers of alerts manually can be very costly and challenging. Fatigue faced by reviewers can also lead to an increased likelihood of human error which is a risk to the business. Despite these challenges, compliance can be easily achieved through adopting a healthy compliance culture or tapping on new technologies such as Regulatory Technology (RegTech).

Compliance Culture

A good compliance culture can be created with 2 simple steps:

1) Designate a chief compliance officer

This designation helps to empower the employee in the position by giving them significant decision-making and supervisory authority.

2) Establish a compliance department

Including a compliance department with clearly defined leadership, along with robust decision-making and oversight powers, helps to promote a culture whereby employees feel safe reporting misconduct.

In the presence of our ever-changing regulations, it is necessary for the business leadership to adjust their perspectives accordingly and view their individual employees as the most valuable resources when it comes to detecting illegal activities. By having a proper delegation of power, it helps to incubate a culture that rewards employees for doing the right thing. To sum up, having a good compliance culture within a business can make or break the company. It is thus essential to improve corporate cultures by underlying compliance initiatives.

Tapping on New Technology

RegTech, is an emerging technology that helps businesses with their regulatory compliance. Businesses focusing on the financial sector should embrace RegTech and make use of it. The automation that RegTech offers can help risk managers to process data in a more efficient and accurate manner. From identifying high-risk clients to identifying suspicious transactions, RegTech is the key to ensuring compliance.

In this age of big data, it has become increasingly difficult for compliance leaders to fulfil their duties through manual labour. Ultimately, the tools that RegTech offers definitely serves as a necessity for businesses to achieve compliance in an efficient, accurate and cost-effective manner.

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