Compliance Product Manager, Nina Mileksic, here at Microgen discusses when changes in regulatory landscape eats into the budget you have and what implications this has on the industry.
Changing compliance landscape
Over the last decade, we have seen a significant increase of regulation impacting Trust Administration and Corporate Services industries. It started with enhancement of the AML/KYC requirements to counter money laundering and terrorist financing. This then followed by CRS and FATCA tax reporting requirements, continued with Beneficial Ownership, Economic Substance and now Mandatory Disclosure Rules.
Large international regulatory projects aside, even individual jurisdictions have increased scrutiny of the industry. With regulators increasing their reporting requirements, and more frequently querying data submitted by companies.
What does it mean for the industry?
Increased regulation and stricter enforcement places additional burden on trust administrators, corporate service providers, family offices, advisers and many other industry participants. It usually starts with the necessity to modify business processes and increase the number of checks and balances. As well as this, the bureaucracy of keeping checks and balances documented, followed by filing required regulatory returns to the relevant authorities. An increase in administrative work, record keeping and filing also means adding extra headcount, or extra hours for existing staff.
On the other hand, increased regulatory scrutiny puts more demands on the compliance teams. From acting as an internal advisor on compliance matters, to regulatory liaison, monitoring of company’s compliance with policies and procedures, updating compliance documentation, reviewing and investigating exceptions and alerts, and more frequent and lengthy engagement with regulators all significantly increase their workload. Many companies found themselves in a position where they had to increase their compliance headcount to cope with the increased workload. Alas, the pace of regulation isn’t showing any sign of slowing, so the additional administrative and compliance burden is only likely to increase.
There is another aspect of increased cost which is less visible and doesn’t always come to forefront in our discussions with customers. Keeping additional information and documentation increases the amount of data being held by companies, and with it comes cost of infrastructure to maintain the software and data securely. The cost and effort to maintain the data and software is exacerbated by the speed of regulatory change. The reason for this is the industry must often react with a degree of speed when a new regulation is announced and solutions designed and used within the company aren’t and cannot always be the most effective or efficient option. The end result of the efforts to comply with increased regulations is often a colourful assortment of processes, spreadsheets, macros, software solutions and databases, which on its own add to the cost of maintenance – in monetary terms as well as people’s time.
"Increased regulatory scrutiny puts more demands on the compliance teams. From acting as an internal advisor on compliance matters, to regulatory liaison... frequent and lengthy engagement with regulators all significantly increase their workload."
Nina Mileksic, Compliance Product Manager
The Big Challenge: An Entangled Web of Piecemeal Data
As a result of a perfect storm, compliance officers often find themselves having to trawl through endless spreadsheets, software solutions, documents and reports. The collation of and formatting the data to arrive at the desired outcome for regulatory reporting often requires an extremely high amount of manual intervention and time investment.
Navigating endless databases, folders, software solutions and spreadsheets takes not only an excellent memory, but also angel-like patience and super-human level of frustration tolerance. It is no wonder we often hear from our customers “I wish everything I need would be in one place!”. We wonder – is there a better way? Although all the existing solutions are based on technology, is there a way to streamline and rearrange various tools to make it simpler, easier, more efficient and elegant to perform the role of the compliance officer?
We believe there is and I look forward to continuing this discussion throughout 2020.
What do you think? Could your job be done in a better, more efficient way? Tell us about it!
You can find Nina on LinkedIn