This is a guest article written by Mark Holmes, the CEO of Waymark Tech.
We’re living through a period of rapid regulatory change. Brexit and Donald Trump both promise to rewrite the UK and US legal systems.
The result? 2017 will be the ‘Year of RegTech’ – the year when regulation technology proved itself and came of age. It has to be, because no one can cope with this pace and scale of change without it. No one can do this manually. Multinationals and law firms must adopt the latest tech in order to survive and thrive. And this year, they will.
Change isn’t only happening in the financial services
What we’re facing right now is unique. Vast, sweeping regulatory change affecting all industries – all at the same time. In the past, change was generally confined to a single sector. Governments sensibly took one thing at a time. But Brexit and Trump have tipped this on its head, putting all industries in the firing line, all at once.
With Brexit, Britain could face a so-called regulatory ‘cliff edge’. UK industries will go from one trans-European framework to a national one, potentially overnight. In the US, Trump has said that he will take aim at regulation everywhere, from industries as diverse as transport and financial, to agriculture and pharmaceuticals.
So, regardless of where you’re working; in mining, automotive, energy, banking or elsewhere, you’ll have had your eye on the UK and US government to see how things might change. After all, the cost of regulatory failings is huge. According to Boston Consulting Group, financial institutions across the globe have paid $321 billion in fines since 2008 for non-compliance. So no one can afford to fail.
Compliance teams are already stretched, to the limit
It’s bad timing for compliance departments across the world. They’re already stretched, and it’s starting to show. Just last week many of the world’s top banks were accused of allegedly being involved in a $21 billion Russian money laundering scheme, named the ‘Global Laundromat’. It is feasible that this scandal was missed by compliance officers partly because they are already so overwhelmed.
Brexit and Trump add a whole new layer of risks. On one hand, big new regulatory packages, rules, and regulations – like MiFID, GDPR and SFTR – are coming into application over the next 12 months, and many firms still aren’t ready. They’re racing to get new compliance procedures into place, and many feel out of control.
On the other hand, regulators increasingly expect companies to be more proactive when it comes to compliance. Companies can no longer simply wait until a scheduled review before determining whether an issue exists. They must constantly monitor their activities to highlight issues and take remedial steps early. This absorbs even more of compliance officers’ time.
Technology is the solution
To date, adoption of regtech has been held partly back by suspicions about the risks of new technology, and the false threat regtech presents to compliance officers’ jobs. But faced with the scale of regulatory change, companies need regtech on their side. They need the control regtech gives back; the time, the efficiencies and the peace of mind.
Rather than lead to job losses, regtech unleashes much-needed capacity. It releases compliance officers from administrative jobs – like day-to-day monitoring – freeing them up to be curious, to dig deeper into the data and find signals that need investigation. It gives them back their job.
In addition, regtech forces firms into the 21st Century. It’s becoming increasingly clear that the real risk is not the adoption of technology, but many firm’s allegiance to the old ways; risky methods of operation that are no longer fit for purpose in a global, fast-moving, 24/7 world.
But law firms shouldn’t get worried
Many law firms are also worried about regtech. They see the law as a zero-sum game: every client company that adopts regtech must result in less legal spend. But in reality, that’s simply not the case. Regtech is for law firms too. They can use the technology to generate efficiencies, improve their service, lower their costs and increase profits. Regtech and law firms are on the same side.
In 2017, the speed of regulatory change will mean that law firms will be swamped with urgent questions from their clients. They’ll struggle to cope with the influx. They may be slower to respond; less able to deliver an outstanding service. This could, eventually, lead to a loss of clients and money – to firms who have adopted regtech.
Regtech enables law firms to automate mundane, repetitive tasks, like monitoring global legal cases for relevant information. And it frees lawyers to spend more time on their core service: giving expert, nuanced and professional legal advice.
Law firms must adopt technology to keep up with the change. And keep their business ahead of the competition. Regulations are changing at breakneck speed and this will only accelerate this year. Faced with this challenge, smart companies and law firms will adopt tech solutions right now before it’s too late. That means 2017 will be regtech’s year.
Mark Holmes is CEO of Waymark Tech, a regtech firm that provides financial organisations with time-critical, personalised information about the changing regulatory landscape.