As a result of escalating regulation, technology development, an increasing focus on culture and conduct risk, RegTech is increasingly playing an integral role between compliance and business operations. As with other industry sectors for example, financial institutions have been forced to rapidly pivot their operations online due to the disruption to traditional business models caused by the COVID-19 pandemic. "A major concern today for the wealth management industry is how to ensure they can meet compliance regulations," notes Yvonne Ngai, APAC Business Lead at Apiax, a Swiss company with offices in Switzerland, Portugal, Singapore, Germany and the UK. Apiax provides a RegTech business enablement solution for banks, wealth managers and asset managers around the world that helps them realise business opportunities and minimise risks—all the while staying compliant.
In addition to the rapid shift adapting to online and digitally-centric ways of working, Ngai explains that financial institutions face challenges keeping up with the breadth and pace with which new regulations are being developed and the increased focus on enforcement. For example, financial institutions that provide clients with cross-border services, the requirement is to use a cross-border framework which incorporates comprehensive regulatory guidance, policies and manuals as well as compliance training and monitoring. Notably, the cross-border framework can be a challenge for financial institutions based in locations such as Hong Kong, Singapore and Switzerland—the world's top three offshore wealth centres—which traditionally offer services to a globally dispersed client base. According to Ngai, challenges are compounded further due to a tendency for different functions within financial institutions to operate in compliance silos. "This puts them under significant pressure, especially those who have businesses or clients based in different jurisdictions," she notes. There are even examples of financial institutions retreating from markets where they have previously offered wealth and asset management services.
According to an Apiax cross-border compliance survey involving more than 40 financial institutions, challenges begin with the fact that the majority (67%) of respondents operate under numerous banking entities. With each entity being separately licensed in its respective country, this adds an additional layer of complexity. Furthermore, 35% admit they struggle to provide clear do's and don'ts, while 19% cite training concerns.
On a positive note, according to Ngai, across the Asia-Pacific region, and markedly in Hong Kong and Singapore, significant steps are being taken to promote RegTech through the collective efforts of regulators, the financial community, the technology community and other stakeholders. In November last year, the HKMA announced a two-year roadmap to promote RegTech adoption in the Hong Kong banking sector with a view to accelerating the use of technology for enhancing risk management and compliance. "Ultimately, RegTech lends itself to cooperation and collaboration because those in the finance sector want to digitalise reporting and compliance processes to eliminate risks and comply with the same regulations," Ngai says.
While the costs of maintaining a high standard of compliance can be significant, Ngai believes that RegTech solutions should be evaluated for the benefits the technology provides instead of being viewed as a cost. For example, by eliminating silos and looking at the bigger picture to transform investment in RegTech into customer-centric and revenue generating opportunities. "Instead of looking at RegTech as a way to automate and reduce costs, it should be assessed from a business enablement perspective to facilitate innovation, growth and customer focus," Ngai advises. For instance, RegTech adoption can help financial institutions recognise patterns in their data across the business and harmonise it, and in the process reduce costs, improve the quality of reporting and overall regulatory compliance effectiveness.
Apiax transforms text-based documents into digital rules to help financial institutions simplify their compliance burden and ensure their business remains compliant. By digitising compliance, Apiax gives companies a new kind of flexibility when it comes to bridging the gap between compliance, business and technology. "Digital solutions ensure compliance with relevant regulatory requirements—directly within the portfolio management software, with little to no supervisory intervention required," Ngai explains.
The Apiax solution allows financial institutions to directly embed compliance into their existing systems. This removes barriers to financial institutions' global business, enables them to reduce time-to-market and increase their revenue numbers at lower risks. Furthermore, their solution leverages multi-jurisdictional use cases to provide yes-or-no answers to complex regulatory questions which are continuously verified and kept up to date with the latest regulatory changes.
The Apiax system also reduces dependency on compliance training, which according to Ngai, given the volume and complexity of regulations, are often little more than "box ticking" exercises. Relevant stakeholders, such as client relationship managers (RMs), can access guidelines through apps and be compliant at the touch of a button, instead of reading multiple pages from a policy or manual or the often lengthy processes of working through compliance departments. Prime examples include an RM being alerted to the processes around customer on-boarding, know-your-customer (KYC) requirements, anti-money laundering (AML) and providing advice or offering financial products to clients located in cross-border jurisdictions.