Before the financial crises, the bank grew careless about dirty money. Some banks helped sanction busters, some channeled illegal money, and some moved cash for other country’s launderers. The regulators begin to take oversight seriously. They asked defaulted banks to pay stiff penalties.
The crackdown is deserved, but some of the results were awkward. It is observed due to fear that they might commit financial crimes some banks refused services to their clients. The pulling away from the client is so indiscriminate that it “choke-off” financial flow to many countries in Africa, Eastern Europe, Latin America and the Caribbean countries. These nations have been dropped by the western correspondent bank, which was their resource for clearing dollar and euro. This resulted in people of these nations to starve for food, medical supplies, etc.
A financial system that let dirty money flow freely is bad, but blocking the clean one is worse. The current financial technology offers the prospect of filtering susceptible transaction for the legitimate one. People say “Blockchain,” a digital-decentralized-distributed-ledger technology may help to address the issue by building a solution, which is cheap and have a clean way to verify customers and transaction.
Through the blockchain started with Bitcoin and had a history of money. It is a just first use case. It is strange that a ledger – a dull but practical document, which is mainly associated with accounting – is described as a revolutionary technology. They record and confirm:
The consensus about what is in the ledger, and trust that the ledger is accurate is a fundamental building block of market capitalism. The firms and government can use block chains to make work more efficient and reliable.
What is RegTech?
RegTech is a software solution. It is usually delivered on the cloud. It automates governance, risk and compliance process. In the finance industry, it is often thought that RegTech is its subset. However, RegTech has application in various industries like utility, manufacturing, e-commerce, SaaS and cloud service providers, etc.
Benefits of using RegTech for a company are:
- Lowering cost: “Compliance” is a cost to a business. By removing “hassle of audit”, RegTech can make the compliance process less expensive. It frees up staff to work on projects. It helps the organization’s in their daily operations and long-term goals. It fosters innovation and improves profit.
- Know its data more: RegTech solution allows you to analyze large, complex dataset. It gives clear visibility into your organization’s key risk indicators, asset results, and compliance initiatives. It generates the integrated reporting of self-assessment, manual assessments and automated controls.
- Reduces anxiety: Most out sourcing organizations don’t have in-house compliance professionals. By implementing the RegTech solution organization ensures that it is up-to-date with the latest standards. It reduces worries on the organization’s readiness with the latest
Even in the world of deregulation era, RegTech remains relevant.
Don’t use a spreadsheet
Despite having regulatory and compliance solutions, many organizations still use spreadsheets to conduct compliance activities. Though the spreadsheets are highly useful, it is not a tool to use for regulatory and compliance function. Dependance on spreadsheets to manage regulatory and compliance process is costly and inefficient. Keep in mind that a spreadsheet is a document. It doesn’t have an audit trail which is a critical to the integrated risk management.
Compliance requirement is growing. There are always new issues monitoring and documentation of employees trading, insider trading issues, and market abuse. These expanding tasks can only be managed with the right software support because human resource simply can’t keep pace. So the answer is the compliance suit which is modularly designed. It needs to cater various things like:
- Customer due diligence (KYC- Know Your Customer)
- Detect high-risk and politically connected individual
- Prevent money laundering
- Financial illegal activities, g. terrorism
- Detecting and managing conflict of interest
- Monitoring sanctions and embargo list
There are various software which helps to manage Risk and Compliance. SofwareAdvice ™ is a trusted resource for software buyer. It is a Gartner company. Gartner is the world leading information technology research and advisory company. SoftwareAdvisor has published a list of risk and compliance management software. Its URL is www.softwareadvice.com/compliance/
We need a software solution, which allows human to keep pace with ever-changing business risk and compliance need. I believe that blockchain based technology will bring in more transparency, which is needed to manage risk and compliance.
About the Author
Atul Gunjal is the Co–founder and CEO of IWORKTECH, having over 30 years of vast experience in software industry. He is an electrical engineering graduate from the University of Pune, India. Atul directs IWORKTECH’s overall vision and business strategy, including expansion into new markets, high-level technology direction and operations. His goal is to establish IWORKTECH as one of the respected Outsource Product Development Company.