RegTech Solutions for Compliance – Critical capabilities

Global landscape is evolving rapidly and becoming even more complex. Due to regulatory proliferation and dynamic nature of regulatory requirements, the control universe Compliance Function is required to manage is easily increasing.

Nowadays Compliance leaders are under intense pressure to respond quicker to continuing waves of regulation. Corporate Compliance managers are responsible for ensuring that companies are complying with all applicable regulations, internal codes of conduct, policies and procedures but available time is frequently limited and the consequences for noncompliance can be quite significant. Besides, compliance activities are often carried out by manual processes and using legacy systems (static tools such as spreadsheets).

Managing regulatory changes can thereby be rather costly and time-consuming if appropriate resources are not committed. Therefore, the biggest challenges facing Compliance professionals, are mainly related to cope with uncertainty, lack of resources and inefficient organization’s systems.

Regulatory compliance level can surely be improved through multiple approaches. For this reason, an accurate analysis of organization’s profile (like company’s size, scale and maturity of the compliance program, …) will be useful to determine the most suitable method.

RegTech solutions are disrupting the market by proposing new ways for performing compliance activities efficiently. Tech-based regulatory compliance approaches consist on innovative solutions using technology for solving regulatory matters.

This nexus between regulation and technology innovation supports greater strategic advantage, reduces costs, and harmonizes coordination across the organization. In addition, RegTech solutions provide support for standardization of compliance activities and automation to increase efficiency and effectiveness of compliance management programs.

Hence, being aware of the real potential of RegTech solutions is key to better address the needs of Compliance leaders.

Advanced technologies like Artificial Intelligence (AI), Machine Learning (ML), Natural Language Process (NLP) and predictive analytics are maturing rapidly for various compliance use cases. To really fortify an organization’s Compliance Function, it would be handy to count with RegTech solutions that harness technologies across capabilities that align with and support the following areas:

«Agile» regulatory tracking

Due to ongoing regulatory uncertainty, monitoring and tracking regulatory changes on all applicable rules can turn into an unfeasible task. Smart features to support «agile» regulatory change management include:

  • Regulatory Detection: automated real-time alert of regulatory change content from different sources;
  • Data capture and content summarization: automated process for extracting key metadata and information from regulatory documents and save them into a structured database. This capability can be supported by AI-powered regulatory change management summaries;
  • Classification models: automated data mapping on pre-configured taxonomies in order to quickly identify involved regulatory area and process owner;
  • Regulatory obligations extractor: use of ML and NLP to interpret regulations and track new compliance requirements;
  • Impact Analysis: use of ML and NLP for mapping internal policies and controls to compliance requirements;
  • External Rules overview: coordinated approach designed to managing and mapping related regulatory documents.

Control automation

Traditional Compliance checks are often performed manually and are not usually integrated into applications workflows, resulting in decreased agility. Smart features to support Control automation include:

  • Control Catalog and Automated Testing: large number of manual controls can be automated using specific bots, structured checklists and self-acting schema validation. This could reduce time dedicated to repetitive controls and improve effective monitoring;
  • Assisted Gap Analysis: AI models can be trained for supporting Gap Analysis activities by comparing regulatory requirements content versus internal policies content and pointing out compliance drift.

Organizations using advanced features can surely take faster and more confident decisions to mitigate reputational and operational risk.

Investigative Case Management

Case and incident management continue to be an important part of an organization’s Integrated Risk Management strategies.

Advanced RegTech features can support Compliance Function proposing appropriate remediation measures and necessary elapsed time to mitigate deficiencies detected during control activities.

Case management supports tracking and reporting on compliance-related incidents. Sharing and matching compliance information across the Organization promotes interdepartmental collaboration and shall facilitate individuation and management of common gaps.

Report development

Developing and managing institutional reports is among the most critical strategic tasks. RegTech tools can enable user friendly solutions including capabilities like:

  • branded templates and pre-filled forms responding to management and Authorities’ requirements;
  • integration of organization’s information (avoiding manual operations);
  • document change management and version control;
  • document development and approval workflow.

Some of the capabilities described may not be fully supported today but real-world applications are already being introduced and RegTech industry will continue to evolve. In the next 3-5 years we will probably witness a revolutionary shift in available solutions for performing compliance.

Finally, Organizations need to be pragmatic and think much more ahead while selecting appropriate compliance tools.

Diana Ramirez Sanchez

Is member of the Asociación Española de Compliance – ASCOM

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