March 15, 2018 Interview: How to Bring Transparency to the Compliance Jungle

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Chiara Gelmini is the Business Practice Manager at Appway and specializes in compliance. We sat down with her to get her thoughts on the complicated and topical subject.


Compliance has become a major headache for many wealth managers and private bankers today. Why is that?


Banks are concerned with the record number of compliance-related tasks they now need to complete and the growing quantity of new regulations that cover everything from consumer protection to security, transparency, governance, and tax. Put these factors together, and it’s no wonder they’re creating headaches for compliance departments.


We’ve seen first-hand how our global clients sometimes face overlapping, even conflicting, regulations across different jurisdictions. MiFID II and GDPR, for example, tend to constrain banks. Other regulations, like PSD2, offer potential new opportunities by opening the door to data aggregation systems and new technologies like screen scraping.


The challenge is twofold for compliance workers: they have to ensure company-wide compliance on an operational level and also take advantage of the potentials of incoming regulations.


How is compliance impacting banking operations?


The compliance department is becoming more essential in banking operations. We see compliance experts interacting with departments across the entire bank, and increasingly also with specialized external providers like e-KYC facilities or managed outsourcing providers like Deloitte DMS.


Internally, the compliance department is telling the front office how to source required documentation and data directly from the customer, tasking operations and IT with which updates to install and activate, and regularly interacting with business line managers who approve or reject new potential investors and make decisions on critical cases.


So, what specifically is creating the headaches?


In their daily work, compliance experts deal with various inefficiencies; there’s a lack of planning, management, and reliable execution of compliance-related tasks throughout the organization. There are limited planning and prioritization capabilities available to the compliance department. Today’s IT systems don’t provide a holistic view of the bank’s actual compliance situation. When speaking with compliance experts at leading private banks, we often hear them say, “I wish I could quickly define my task priorities.”


Another issue is that customer information isn’t always collected in the right way or format. Naturally, relationship managers don’t have the same depth of regulatory knowledge and compliance is not the focus of their job. They need guidance.


You mentioned a lack of connectedness across IT systems. How is that possible, given the considerable investments in compliance-related applications that most banks have made?


A specialized compliance system helps compliance experts perform specific work checks and analyze and manage data. But it creates yet another siloed application in the bank's IT landscape.


At the same time, most banks have been developing new patches and workarounds for their legacy IT systems in response to changing regulatory needs. This has led to a lot of patchwork and unintegrated processes. It’s now causing more complexity and increasing costs.


What type of technology would banks need to solve this?


Compliance experts need a tool that brings transparency into the jungle of compliance-related tasks and that enables effective collaboration between all relevant parties, including internal and external collaborators.


Compliance experts are knowledge workers. There are hardly any two compliance cases that are exactly the same. This means we cannot force them into a predefined process. On the other hand, when collaborating with other departments, there are certain recurrent patterns that lend themselves to automation. By streamlining their interactions with compliance, for instance, relationship managers can be far more effective in their daily exchanges with clients and will thus only have to ask the right questions once.


How can the right solution support compliance experts with this?


The right solution allows the compliance department to set the parameters for how to most effectively handle each individual case, departing from the available data while supporting collaboration with other departments and external parties through structured workflows. By including the compliance viewpoint in the design of the customer’s journey, the solution enables the bank to become compliant ‘by design’ and avoid making a huge effort each time there is a change in the regulatory landscape.


The ‘compliance by design’ approach also allows banks to put regulatory changes in place comprehensively and quickly while leveraging the potential of innovations created in response to new regulations.


You’re saying the bank needs one more IT system…


The difference is that with the right solution, it’s not just another piece of software, but one that connects the bank’s siloed legacy systems, existing data, and new data into a single platform and entry point. By connecting these systems, it forms an effective basis for company-wide collaboration.


The bank–not just the compliance department–has a lot to gain from improved collaboration: greater internal efficiency, improved compliance readiness, and better knowledge of the clients. Relationship managers gain a well-rounded view of client context and relationships, which empowers them to anticipate their clients’ needs and offer the most fitting product combination. Finally, by working together, compliance and client-facing departments can identify strategic opportunities that arise from regulatory changes, such as capitalizing on open banking before competitors do.


Discover how Appway’s Regulatory Reviews for Wealth seamlessly integrates compliance by design and empowers wealth managers to comply with evolving regulations while embracing innovation.

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Written byFrancisca StewartDigital Content Editor, Appway