It is becoming increasingly apparent how costly a low-tech approach to compliance management can be – and in many senses. Thomas Imhof, Regulatory Engineer at Apiax, explains how firms are turbocharging their competitiveness through cutting-edge regtech tools.

Neither easy nor cheap  
What’s more, sourcing the information in the first place isn’t necessarily easy or cheap. To this day, nine in 10 firms are updating their cross-border compliance knowledge via traditional methods like memos, emails and calls and, very likely adding to expenses. Fifty three per cent of firms source legal information via external law firms, and 19 per cent obtain legal opinions from consultancies.

When compliance information is so diffuse and disconnected, it comes as no surprise that a substantial proportion of institutions have still not integrated regulatory restrictions into their key processes at all. What we have, then, is a situation whereby rules are being learned and relearned time and again, up and down the various business departments.

Our vision is diametrically opposed to this mode of compliance “management”. It digitizes knowledge, placing a rules repository at the centre of the organization which allows everyone who needs to consume the information to access and work on it in a context-specific way.

Just as importantly, our approach allows the organization – and its personnel - to consume that information in exactly the way that suits, whether that be through a compliance platform, an app or APIs to existing systems. Whatever their function, busy professionals are typically crying out for a single answer to be surfaced from scores of intersecting rules: this is exactly what Apiax empowers firms to provide.

A rules-creation engine   
This empowerment is certainly about generating standardized and repeatable processes for embedding rules into complex, multi-jurisdictional organizations, fast. The regulatory onslaught shows no sign of slowing down, and interpretation not administration is where experts should be focused. Even more revolutionary is how our technology empowers the experts to disseminate what everyone needs to know without having to constantly call on IT resources (or almost having to become coders themselves!).

It would be accurate to call our solution a rules-creation engine for non-developers. More poetically, you could say it is software designed for compliance specialists, by compliance specialists, which allows them (and everyone else) to get on with their most valuable work.

We are proud to say that the industry asked, and Apiax answered, setting off a trend that will make much of the pains of compliance management completely fall away for great swathes of the industry. Not before time, an abandonment of the low-tech approach is already taking hold.

Enthusiasm becoming investment   
As might be expected, virtually all of our respondents see the advent of digital tools for ensuring cross-border compliance as an important development. Those with an eye on the competition should know that this enthusiasm is definitely translating into investment plans too.

Our study shows that 9 per cent already have a digital rule aggregation solution in place to tackle multi-jurisdictional scenarios. Many of the remainder will be catching up fast. Over the next year, a full 31 per cent aim to fully integrate digital regulatory restrictions into their workflows and at a quarter of firms, client advisors can look forward to easy-access digital rules, which will likely be available through an app. Constant calls to compliance professionals and asking staff to thumb through weighty compliance tomes is now starting to look very passé indeed. We see compliance frameworks evolving from policy, training and personal advice-based approaches to empowering employees via digital rules integrated into the business processes of a financial institution.

Our research confirms that a gulf is opening up between the leaders and the laggards in compliance management. The implications for operational efficiency, risk management and talent retention are plain to see, as is their impact on profitability.

However, the broader improvement that we hope to see is an end to firms self-limiting their potential because the compliance burden makes them fear opening themselves up to certain products, services or even whole markets. Regulation has driven risk-aversion and dampened competitiveness for far too long. Firms need to see tech-enabled coping mechanisms as a real competitive advantage instead.

For more information, visit https://www.apiax.com/

This is a chapter from the 2021 edition of Technology Traps Wealth Managers Must Avoid. Click here to download your free copy. 

[i] Risk Management Association
[ii] Robert Half
[iii] Compliance Professionals Salary Guide – August 2020