Awareness, Dismantling Silos Key to Regtech Strategy

Aveline San, Citi

“Awareness is the most important ingredient in your regtech adoption strategy,” according to Aveline San, Managing Director and Chief Compliance Officer, APAC at Citi, who was part of a panel on regtech adoption during ASIFMA Compliance Week 2021, held 7-10 September. “Know your regtech, know what technologies are out there, who is in the industry and how they can help you,” she added.

Although regtech in the Asia Pacific region and beyond has expanded in scope and complexity over the past decade, the objective has remained the same: “to improve efficiency and effectiveness.”

“Today, it is much more about behavioral risk analytics and augmenting traditional surveillance,” observed San. Among its current projects, Citi has developed a proof of concept for a self-surveillance solution that “brought down false alerts by 95% and found things that we could not have found with traditional methods.”

Regulatory support has accelerated momentum

Jennifer Sunderlin, EY

With the encouragement and support of regulators in the region such as the Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Singapore (MAS), “industry awareness has grown a lot,” claimed San.

The HKMA unveiled its “Fintech 2025” strategy in June this year, which prompted “a lot more serious discussions and investment around how tech can change business front-to-back,” commented Jennifer Sunderlin, Director, Financial Services Consulting at EY.  “Some key themes are coming out around skills,” she added. “Do you upskill your data experts on risk domains, or do you do it the other way around and upskill your regulatory compliance team with tech and data?”

Getting buy-in and developing a holistic approach

While momentum is building, more needs to be done in APAC to gain buy-in, said Jianing Song, Partner, Head of Advisory at KPMG China. A more top-down approach to regtech strategy is also needed. Song quoted a recent survey in which 71% of APAC financial institutions responded that they currently lack a holistic approach to regtech. “That can take many shapes or forms,” noted Song, including “governance, top-down, even simple things such as enterprise wide standards and policy procedures.”

Jianing Song, KPMG China

“When regetech first started many years ago. It was done usually through a back-to-middle approach, going after the low hanging fruit, and there’s definitely value in that,” explained Song. “But as the ecosystem and leading indicators evolve, it’s adopted a much more holistic, enterprise-wide, board strategy top-down approach. As a result, it’s started to encompass broader decision making and factors such as business strategy. In my view, digital data strategy and business strategy are now intertwined and enmeshed with regtech deployment and success.”

And in keeping with taking a broader approach to regetech strategy, Sunderlin remarked: “We need to ask ourselves what the purpose is. A lot of banks fail because they are chasing a tool or technology solution to fix a process which isn’t actually broken. So, one piece of advice is whatever stage of your regtech journey you’re at, remind yourself of your purpose and understand how technology actually fits within your goals rather than the other way around.”

Avoiding rather than responding to risk

The industry is also moving to manage risk in a more forward-looking manner, and an important enabler of that are “data lakes, which have been formed by breaking down internal silos with systems and data,” explained Sunderline. “That has really released an unparalleled opportunity for machine learning and AI to learn from that historic data and then build that into detecting forward looking risk indicators. We’re now seeing a lot more trend towards being able to avoid rather than respond to risks.”

San echoed the importance of dismantling silos. “Involve all the different businesses because you need to stay on top of what’s happening with the pain points of client demands. It’s often the case that ideation will come from what serves clients best, using information you already have in another part of the business that you didn’t know about and finding synergies.”

There is perhaps some urgency to make this happen given the progress being made in supetch used by regulators. As San revealed, “banks are under pressure to play catch-up to develop the predictive capability that the regulators now have with suptech because the regulators have so much more data to crunch and are able to spot things really early on.”