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Protecting Against Cybercrime During COVID-19 - Waymark Tech Blog

Protecting Against Cybercrime During COVID-19

Cyber criminals are “making hay while the sun shines” during the pandemic, but regulators promise to be more understanding. What does that mean in practice?

An uncertain economic situation, financial volatility and a workforce working from home all make for a cyber criminal’s dream come true. The number of threats are growing and vulnerabilities are widening. Keeping data secure is more difficult than ever and this may have a number of compliance and regulatory issues for firms.

Home and mobile working

Most companies have dramatically upped their work from home provisions and they have done so with relatively little warning. Most professional people are almost as well connected at home as they are in the workplace. Broadband speeds are fast and people’s personal computers are generally high spec.

However, home networks will usually not be as secure as a company’s. In the home, you will have increased the number of endpoints coming into your central system which is like making lots of holes in the walls of a building. Even the most secure operation can become compromised.

In March, the UK’s National Fraud and Cyber Crime Reporting Centre reported that Coronavirus related frauds rose by 400% in March. This was said to be linked to the increase in home working. They have issued fresh guidance about the steps firms should take before moving to a work from home model.

Compliance issues

Despite these challenges, the Information Commissioner’s Office has confirmed that firms will continue to face the same reporting obligations as always under GDPR. Privacy rights remain ‘paramount’ according to the watchdog which means breach notification rules still apply.

However, the regulator has said they will allow for flexibility given the unprecedented situation we now find ourselves in.

In a statement, the UK’s Information Commissioner, Elizabeth Denham said:

“We see organisations facing staff and capacity shortages. We see the public bodies facing severe frontline pressures. And we see the many businesses facing acute financial pressures. Against this backdrop, it is right that we must adjust our regulatory approach.”

elizabeth denham

What this means in practice is that the regulator will be more understanding when considering action. It says it understands the operational challenges confronting companies including staff shortages, reduced operational capacity and financial constraints. They use this, they say, to foster an ‘empathetic and pragmatic approach’ throughout the pandemic including how enforcement powers are executed and what technical advice they take.

So what does this mean in practice?

Although they are being more flexible, data protection is still vital which means the rules around breach notification still apply. Any organisation which suffers a breach will still have to report it to the ICO within 72 hours of discovering it. Even so, they have ceased all audits and if the problem is caused as a result of the pandemic, they will take this into account. The commissioner appears wary of being seen to chase healthcare organisations while they are trying to save lives.

Any organisation which processes data will still have to pay their annual fee to the ICO, but will not prosecute any organisation failing to do so if they can provide evidence that they cannot pay due to the fallout from the pandemic.

Last but not least, any fines issued are likely to be lower, for all breaches. The ICO says it takes affordability into account before issuing any fine. Given the impact on companies finances, therefore, that is likely to mean any fine issued will be much lower than before the coronavirus outbreak.

Most importantly, this is no get-out-of-jail-free card. The ICO is being more flexible and it will be more understanding, but a company must still meet its obligations to safeguard data and report breaches. Failure to do so will still result in a fine.

More importantly, failure to take adequate measures will have much wider reaching consequences than just the wrath of the regulators. The ICO may be more understanding, but there’s no guarantee customers will be.

The move to a home working situation also makes your systems and the personal data of your customers more vulnerable. The reputational and financial impact of a hack will be just as high as always.

Coronavirus Gives SM&CR its First Real Test - Waymark Tech Blog

Coronavirus Gives SM&CR its First Real Test

COVID-19 is proving to be the first real test of financial regulations introduced since 2008 with the Senior Managers and Certification Regime in the front line.

Speaking to the Financial Times, the FCA’s interim Chief Executive, Christopher Woolard has suggested that the Senior Managers Regime could give the regulator more weapons in ensuring corporations continue to behave ethically throughout the crisis.

Although he admitted that the FCA had little power to take action against those lenders who did not treat customers fairly, he suggested the regime did give the regulator an option to ensure fair treatment of lenders.

These rules allow regulators to take action against senior managers based on their conduct, including fair treatment of customers. With all commercial lending being unregulated, this will be the only weapon the regulator has to put pressure on banks.

However, since its introduction, the FCA has been criticised for taking relatively little action. After three years, it was only in August 2019 that it secured its first conviction when Barclays Chief Executive Jes Staley was jointly fined £642,000 by the FCA and PRA for his response to an anonymous whistleblower letter.

Since then, the regime has been extended from the banking sector and across all authorised firms, but its impact is still one which exists in the fears and imaginations of senior managers rather than in actuality. However, this crisis could be an opportunity for SM&CR to play a significant role.

Since the outbreak of COVID-19, there have been a number of complaints about how banks have been treating their customers, especially in the way the Government-backed loan scheme has been rolled out. The Federation of Small Businesses has been among those raising concerns about how the loan scheme is being implemented.

Although pace has picked up, approval rates are lower than with commercial lending despite the number of companies facing difficulties. The FSB has called for reassurances from the regulator that the banks are not putting profits before people.

The FCA has written to the banks reminding them of their responsibility to treat borrowers fairly at this stressful time, but beyond that it has relatively few direct powers. SM&CR could offer an alternative approach, and Woolard admitted this period would prove to be a test of the scheme.

Nonetheless, the difficulty they’ve experienced in securing convictions so far suggests they might face an uphill battle. The problem for the regulation is that it can be difficult to attribute the action of a company to a single individual. The burden of proof lies with the FCA and, in many cases, this is proving too high a hurdle to clear.

So far, then, SM&CR has been used as an abstract threat – a tool to place more pressure on individual managers to take greater responsibility for good conduct. Whether this will be enough remains to be seen.

COVID-19 is the first period of great stress for the financial sector. It is at these moments that corporate responsibility and regulation comes under pressure. It’s also at moments like these that the cracks show and problems in the existing system are there for all too see. This in itself could serve as a warning to any corporates who do not heed the FCA’s letter and treat customers fairly.

Even though the regulator’s powers may be limited at present, if they are not satisfied by the actions of lenders during this time, they will be more likely to step up their oversight.

This could come in the form of enhanced regulation and stricter rules in the future.

EBA Updates Guidelines for COVID-19 - Waymark Tech Blog

EBA Updates Guidelines for COVID-19

The European Banking Authority has issued a new set of guidelines updating its approach to COVID-19, including issues of default, regulatory requirements and recovery planning.

The coronavirus pandemic has sent ripples of shock waves across the economic and business landscape affecting how businesses can maintain operations as well as sparking increases in defaults. Regulators have been issuing guidelines about how they will mitigate such effects, the latest of which comes from the European Banking Authority which has provided updates on risk, supervision, flexibility and moratoria on loan payments.

Moreover, the EBA has provided further clarity on its attitude to how flexibility will guide supervision in market risk, recovery planning, digital resilience and the Supervisory Review and Evaluation Process (SREP).

Here’s a quick look at what these guidelines are and what lessons firms should take…

To mitigate the impact of exceptional volatility triggered by COVID-19, the EBA proposes to adjust the capital impact and amend its standards on valuation. Among other things it will introduce is a 66% aggregation factor which will be applied on 31 December 2020.

Flexibility

The challenge of COVID-19 is having a considerable impact on firms and the EBA is making allowances. There will be a more pragmatic approach to SREP assessments in 2020 which will focus on the most serious material risks created by the crisis.
It will also delay reporting on the first FRTB-SA figures to September 2021 in recognition of the impact the pandemic is having on businesses and will offer greater flexibility on prudential requirements for competent authorities for banks using internal VAR models.

Recovery planning

The next issue is how businesses will recover. This is a highly fluid situation and no organisation is entirely certain about what recovery plans will look like because they still don’t know the full scale of the challenge. The EBA says the focus should be firmly on understanding which recovery options are necessary and can be applied under the current high stress conditions.

The EBA has also provided clarity on the prudential application of default and forbearance whether in the form of postponement of payment or interest of a credit facility granted by a bank to a borrower in financial distress.

The EBA has clarified that a payment moratorium which abides by the guidelines will not lead to a reclassification under the definition of forbearance, banks should still categorise such exposures as “performing” or “non-performing” according to the applicable requirements. Banks should also assess each individual’s repayment capacity and set up tailored specifications where necessary.

Maintaining resilience

Key to this is digital resilience. As we’ve covered elsewhere, technology is coming to the fore in this crisis. It will create complications and opportunities for businesses looking to ensure digital operational resilience. The regulator says that businesses, will have to ensure business continuity, adequate ICT capacity and security risk management to ensure they can maintain the integrity of systems and continue to offer value and protection for clients. Financial institutions will be able to use the new EBA ICT and security risk management guidelines to focus on priority areas.

The crisis is, and will, have an unimaginable impact on the financial sector. In setting out these guidelines the EBA seeks to ensure allowances are made and to guide businesses through the process of appropriate recovery plans.

Could Coronavirus Accelerate Digital and Regulatory Transformation? - Waymark Tech Blog Post

Could Coronavirus Accelerate Digital and Regulatory Transformation?

COVID-19 is already having a disruptive influence on our economy. The changes we’ve seen in a few short months have been profound. Business is being forced to become more mobile and to embrace digital technology – quickly. While concerns about the impact of new technology will remain, and companies must ensure they do not create unforeseen risks, the pull of the new has just become a whole lot stronger…

In the middle of December, an AI system detected a clutch of unusual pneumonia cases centred around a wet food market in the city of Wuhan. Nine days later the World Health Organization alerted the world to a dangerous novel form of Coronavirus; in the new year it had a name: COVID-19.

AI had already proved itself to be valuable in the fight against COVID-19 – and it could be critical as the financial sector seeks to recover.

The system, BlueDot, was designed precisely for this kind of situation. It was originally inspired by the outbreak of SARS in 2003 which killed nearly 800 people around the world and cost the world economy $40bn. As its founder, Kamran Khan said:

“What I learned during SARS is, let’s not get caught flatfooted, let’s anticipate rather than react.”

Kamran Khan – Founder, Bluedot

BlueDot relies on big data to anticipate and conceptualise the spread of infectious diseases. It uses data from public health organisations, digital media, global airline ticketing systems and various other sources to predict how quickly a disease might spread, and where hot spots might occur. Using this data, for example, they were able to predict which cities had the highest connectivity to Wuhan and which would experience the first cases.

The system could have been used to help inform governments about their responses, and also give companies advanced information on how COVID-19 was likely to spread. This would have assisted them to make preparations in advance.

Time for AI

Already, financial institutions have been using artificial intelligence across operations from customer service and algorithmic trading to cyber security and much more. All these applications have potential benefits in helping the world to cope with a “COVID-19 economy”.

Chat bots and AI call assistants might spring to mind, but they represent only the thin end of the wedge. They can answer most simple questions, improve response times for callers and take the load off call centres. S-Bank, for example, has managed to automate 70% of all calls without intervention from a customer services representative.

But what about the more involved applications of artificial intelligence that most haven’t even considered where lies immense value?

Take, for example, the vast swathes of information currently being published around this pandemic and the numerous regulatory updates coming out from the regulatory bodies. It’s impossible to assimilate it all and apply it without working 24/7. Even then, it wouldn’t be doable. With the application of AI in this instance however, it is possible to intelligently “cherry pick” the pertinent information, successfully discerning it from the irrelevant data and being able to access it in an easily digestible format. Not only does this save time but adds enormous value to clients of all types of businesses and within a range of sectors.

But that’s still just scraping the surface of AI’s capabilities in these use cases.

Financial institutions may also turn to AI to safeguard their businesses during uncertain times. As recent Office for Budget Responsibility figures show, the impact of the lockdown could be unlike anything we’ve seen since the Great Depression. Stock markets have gone into meltdown and even the most experienced analyst will struggle to accurately predict what’s going to happen to the economy or to the markets over the next year.

Businesses in all sectors will need to be much more aware of opportunities and AI systems are likely to prove helpful to them. Investors will be able to identify emerging trends earlier, companies will be able to take appropriate positions and thereby be enabled to take a more central role in everything from financial management to cyber security, keeping systems ticking over and alerting management to potential problems a lot earlier.

Regulatory Hurdles

But what about the regulatory hurdles? Given this extremely uncertain time, it has never been more difficult to stay up to date with all the regulatory changes and the new information constantly being released. A week now feels like a year in “normal” times. On the one hand, artificial intelligence can expedite reporting requirements and make it easier for firms to demonstrate compliance, but on the other, less human involvement could potentially reduce oversight and may make it more difficult for firms to ensure the “robots” are behaving appropriately.

Well actually, no.

With the pressures of lockdown and the speed in which the pandemic overtook our world, demand for more advanced solutions has grown significantly and pressure is being placed on regulators to develop frameworks that facilitate the sustainable and safe growth of AI solutions.

This is where AI-as-a-Service comes in and can benefit these businesses. From uncovering connections and patterns in vast, unstructured datasets to improving the way that new regulations are introduced in the future. These, along with insightful analysis are just some of the ways that advanced artificial intelligence solutions are helping businesses to navigate these troubled times.

Protecting Pensions From COVID-19 - Waymark Tech Blog

Protecting Pensions From COVID-19

With stock markets tumbling in the wake of the COVID-19 pandemic, pensions are suffering and customers are anxious. Recent trends have seen people demanding more complex products and a greater control over how their pensions are invested. While this has been popular, and has helped people create more tailored portfolios, it can also create problems given the market volatility caused by the virus.

Regulators’ focus will be on ensuring customers receive the best possible support in making appropriate investment decisions. Investment products should be appropriate for individual needs and marketed in a fair way which is not misleading. Firms will be encouraged to help customers find products that meet their needs as well as provide access to clear information in “plain English” explaining their options.

The FCA is also reiterating the need for higher standards of governance and control to protect customers, while ensuring everything is done with consumer interests at heart.

Avoiding Scams

Unfortunately, the crisis also increases customers’ vulnerability to scams or making bad investment decisions. Before the crisis, pensions were benefiting from a boom in investment markets. However, COVID-19 has sent markets around the world into turmoil. Many people will have seen their investment pots shrink considerably in just a few weeks. Understandably, they may be stressed or anxious, both of which make them more vulnerable to making rushed decisions and falling victim to scams.

In the wake of COVID-19 there has been a surge of cyber scams focusing on the current situation and the FCA is working to reduce people’s risk of harm.

“Fraudsters will exploit the coronavirus to prey on anxiety and fear of savers and investors, especially those who may be vulnerable. That’s why we’re urging anyone who is thinking about transferring their pension to check who they are dealing with and only use firms authorised by the FCA.”

Mark Steward, FCA Director of Enforcement

They advise customers to reject all unsolicited offers and be wary of any offers appearing to have high return rates. At times of stress, customers may be more likely to jump on anything that could be a potential “life raft”. Their defences are down, making them targets for unscrupulous operators.

At this time, high quality advice will be at a premium and firms must be aware that their own customers may be more at risk from scams, especially those claiming to be from their pension providers.

Information is vital. The FCA has proposed to launch a consumer harm campaign to help people make better investment decisions and avoid failing into some of the traps fraudsters have set up for them.

In the long term, pensions will recover, but that’s scant consolation for those relying on their pension incomes now. Nerves are jangling and people will need support to minimise the harm they and their pension pots face from the crisis.

The FCA has issued guidance for pension providers and DB transfer advisers as the coronavirus pandemic develops. They are working with industry to ensure the market can deliver fair outcomes for consumers. They also set out how firms can, and should, support consumers that seek access to their pension savings during the current pandemic.  

Read the full guidance here: https://www.fca.org.uk/firms/pensions-and-retirement-income-our-guidance-firms

Financial Conduct Authority Updates Action on Coronavirus - Waymark Tech Blog

Financial Conduct Authority Updates Action on Coronavirus

As the UK goes into lockdown the FCA continues to update its guidance and work out how it can support the financial sector and those who rely on it through what is now undeniably, an unprecedented crisis. With questions about trading practices, vulnerable customers and reporting, the FCA has issued a series of statements over the past few weeks outlining its expectations.

Short selling

The FCA has not followed the examples of other countries such as Italy and Spain in banning short selling. Both countries have banned the practice in order to counter market volatility as the virus spreads across the world. Experts in the US have also argued strongly against short selling. However, the FCA claimed there was no evidence that it was behind the recent turmoil in the market. Indeed, they said short selling remains a useful tool in investment strategy, allowing companies to manage risks by taking long and short positions.

Vulnerable clients

Its work on vulnerable clients has been shelved as it postpones all non-essential work in the face of the pandemic. Publication of its guidance on vulnerable customers will be placed on the back burner for the time being.

However, the FCA has stepped up pressure to prevent repossessions in the fallout of the crisis. The regulator’s guidance says lenders should offer a three-month payment holiday in the face of the spreading pandemic. It should be granted where homeowners are experiencing payment difficulties because of COVID-19. This can apply where a customer first asks for leniency or if a lender feels they qualify for a break. The Government has said there is no expectation under its guidance for a lender to fully investigate the circumstances surrounding a request for a payment holiday.

“We are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.”

Christopher woolard, interim chief executive of the fca

Delayed disclosure

The FCA has urged companies to delay publication of their preliminary results for at least two weeks.

“The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly.”

Financial conduct authority

Companies, it said, should give due consideration to the impact of the virus and that the events of the last couple of weeks meant that time tables set before the virus would mean there would be little time to achieve this.

It says it is in talks with the audit regulator, the Financial Reporting Council (FRC) and the Bank of England’s Prudential Regulation Authority (PRA) about a package of measures to ensure companies take time to prepare appropriate disclosures. The FRC, for its part, has also asked companies to delay disclosing financial reports rather than produce substandard audits.

This is uncharted territory for the entire sector. The FCA’s role in this is to reduce turmoil as much as possible and put pressure on companies to maintain sustainable and responsible policies which do not cause additional stress and anxiety to their customers.

What Will Coronavirus Do to the Economy? - Waymark Tech Blog

What Will Coronavirus Do to the Economy?

The world has never seen anything like it, at least not in living memory. Millions of people in quarantine, businesses shut and economic activity brought to a standstill. In the short term, the impact is enormous, but once the crisis abates and the world has recovered, what will it mean for the economy, working practices and climate targets?

Short term

The stock markets have crashed. The FTSE 100 Index is down by 34%, Dow Jones by 31% and the Nikkei by 27% (at the time of writing). Both the Dow and the FTSE have witnessed their worst days since 1987. Investors agree that the virus could have a catastrophic impact on the economy.

To compare it, let’s look at the impact of another outbreak, SARS, in 2013. It impacted thousands of people around the world and shaved two percentage points off China’s GDP, according to various estimates. However, the COVID-19 coronavirus is already ten times as wide-spread as SARS.

Most estimates compare it to the financial crisis of 2008. According to IMF, the fallout will be at least as severe as 2008. Even so, it says it still expects a recovery in 2021. So far, 80 countries have asked the IMF for emergency finance and governments around the world are taking extraordinary measures to stabilise the economy. The UK has injected more than £300bn, into the economy to stabilise businesses and worker pay, and have effectively nationalised the entire private sector by agreeing to guarantee 80% of people’s pay. Germany is preparing a €500bn package and the US has announced their $2 trillion stimulus bill. Central Banks have slashed interest rates with the UK reaching a record low of 0.1%.

The measures are extraordinary and it is remarkable how quickly economic orthodoxy has been abandoned. Ideas such as basic income or quantitative easing for the people which, until a short time ago, were on the fringes are now moving into the mainstream.

But the real question is: what happens next. When the economy finally picks itself up, what will it look like?

Financial regulation

The immediate impact for regulators is to abandon so called non-essential work to focus on the more pressing matters in hand. Both in the US and in the UK, regulators have been urging relief for borrowers with payment holidays.

They are considering loosening some of the tighter rules on banking lending. EU regulators are likely to relax their attitudes towards non-performing loans and US regulators are considering relaxing liquidity rules on banks to ease the financial pressures on them during the COVID-19 outbreak. The aim is to encourage banks to make loans to companies who will currently be seen as an economic risk.

Environment

Another question will be what happens to targets for climate change. In the immediate term, COVID-19 may be an unexpected boost in countries’ attempts to hit their Paris targets. The virus has shut down industrial production, temporarily bringing about a dramatic reduction in pollution levels. Images from the European space agency show a dramatic drop in pollution levels over China compared with 2019.

Paul Monks, Professor of Air Pollution at the University of Leicester, has predicted that there will be some crucial lessons to learn.

“We are now, inadvertently, conducting the largest-scale experiment ever seen,” he said.

Paul Monks

“Are we looking at what we might see in the future if we can move to a low-carbon economy? Not to denigrate the loss of life, but this might give us some hope from something terrible. To see what can be achieved.”

Paul Monks

The reduction in air pollution could be beneficial for asthma sufferers and may reduce the spread of some diseases. Already, reports suggest water sources are cleaner and the canals in Venice are clearer than they have been in living memory.

The question will be:

Is this a temporary slow down and will things return to normal after the outbreak?

The slowdown has been remarkable. The airline industry, one of the heaviest producers of emissions is in freefall. Oil use is dramatically down. It may take years to recover to pre-crisis levels.

On the other hand, during past economic crises, emissions have been quick to rebound. However, with prudent management of stimulus funds and permanent changes in behaviour this crisis could be the disruption the economy needs. Companies are working virtually, travel is being reduced. The world is about to discover that it can work much more effectively remotely than it imagined.

Coronavirus has already had an incredibly disruptive influence on markets, behaviours and attitudes. It will change the way businesses operate and has given a timely boost towards climate targets. Whether those changes will prove to be permanent, time will tell.

Coronavirus: Regulators Scramble to Prop Up Financial Sector - Waymark Tech Blog

Coronavirus: Regulators Scramble to Prop Up Financial Sector

Financial regulators are formulating plans to cushion the blow of coronavirus including assessing contingency plans, fiscal stimulus and easing the pressure on borrowers.

The arrival of coronavirus has sent tremors through the stock market. Wall Street experienced its worst day since 2008 and the ECB has warned of a collapse on a scale of the financial crisis. It is both a global health and economic crisis and regulators around the world are scrambling to mitigate its impact.

China

In China, which has had more than 80,000 cases and over 3,000 deaths, the virus is already having a major impact on the financial system and regulatory strategy. Until now, the China Banking and Insurance Regulatory Commission, would scale back its war on bad loans.

Under the leadership of Guo Shuqing, the regulator has worked hard to tackle problems caused by bad loans and excessive leverage. He has been extremely successful but that war will have to wait. The regulator has said that new bad loans created during this crisis should not be considered non-performing loans.

Italy

In the second worst hit country, Italy, the focus is also on reducing the pressure on loans. Regulators are planning to introduce a widespread moratorium on debt repayments for consumers and businesses.

The announcement which was made by Italy’s Deputy Economy Minister, Laura Castelli, comes after the entire country was placed under lock down. The Government has also promised to inject €10bn into the economy.

UK

“Keep calm and drink tea” has been the message from the Government who seem happy to “take the virus on the chin”. However, the FCA is taking more proactive action. Earlier in the month, staff worked from home as the city watchdog ran a drill to test its readiness.

The regulator is also focusing on firms’ contingency plans. In an update on its website, the FCA said it was working with the financial services sector, HM Treasury and the Bank of England to review their responses to the virus.

This will include a review of the operational readiness of firms to assess any operational risks to day-to-day operations.

Meanwhile, at his confirmatory hearing for the Bank of England position, outgoing Chief Executive of the FCA, Andrew Bailey, said Coronavirus was the “first most pressing issue we face” and that it was evolving in “unprecedented and unexpected fashions.”

The severity of the situation, he said, suggested that at some point the bank may have to “focus on providing supply chain finance to ensure the shock effects of the virus are not damaging to too many forms of activity and we will have to move quickly to do that.”

That stimulus wasn’t long in coming. Announcing his budget, the Chancellor, Rishi Sunak, announced a stimulus package totalling £30bn including £7bn for businesses and families and £5bn for the NHS. There will also be changes to sick pay regulations with statutory pay available from day one of self-isolation.

USA

Regulators in the States have called on banks to ensure customers and members who are affected by the virus get the funding they need. In a joint statement, multiple agencies including the FDIC, Consumer Financial Protection Bureau, the Conference of State Bank Supervisors, the Federal Reserve, National Credit Union Administration and Office of the Comptroller of the Currency, said they would provide regulatory assistance to financial institutions, under their supervision, in meeting their financial needs.

EU

The ECB’s Christine Lagarde has called for more coordinated action between European states on the crisis. Speaking by video to European leaders, she warned that without urgent action the virus could cause an economic collapse on the scale of 2008.

The EU is also considering using flexibilities in its state aid rules which are allowed in exceptional circumstances. Officials are drafting a list of targeted options which members could support those states hardest hit by the coronavirus.

Among the schemes which may require state aid clearance from the commission are discounted government loans, tax credits, or deferral of tax payments.

RPA Set to Transform Banking - Waymark Tech Blog

RPA Set to Transform Banking

Robotic process automation is coming and it has enormous implications for the financial sector. Here’s what it means for compliance…

We’ve all got used to stories of how the robots are coming to take all our jobs. But in finance, the arrival of robotic process automation could be something for everyone to welcome, from frontline staff to senior executives. Indeed, at a time when compliance is becoming more complicated, it can’t come fast enough.

Back in 2016, Accenture produced a survey which found that 73% of the people surveyed agreed that process automation, including increased use of robots, would become more common in finance. However, the truth is that so far, financial institutions have only really dipped a toe in the water. There has been plenty of talk about RPA, but all it’s really done is move money around a little bit more quickly up until now. If companies really get to grips with it, they could embed it into their fabric and unlock all sorts of exciting potential.

In simple terms, RPA uses robotic software to automate many of the tasks which would otherwise have to be performed manually. It works faster than humans, makes fewer errors and can analyse much larger quantities of data than mere mortals can ever hope to manage.

Key processes such as auditing, making transactions, managing records, managing employee compliance, and know your customer systems, can all be automated and processed much more quickly.

In the main, this has been sold as a labour-saving device, but that’s only part of the story. It increases productivity by accelerating processes and allowing you to deploy your human staff more effectively. It aids employee satisfaction by freeing staff from the more mundane and repetitive aspects of their jobs and it ensures higher quality of data by eliminating the inevitable mistakes humans make when they get tired or bored.

For the compliance team, though, RPA can be a massive bonus for auditability. It provides much greater data visibility making it easier to keep all the required data in place and to produce a clear data train to demonstrate compliance.

Automated processes are being used for know your customer, due diligence and transaction surveillance, as well as authentication and fraud prevention. For example, robotic software can identify threats or suspicious behaviour which humans might miss and it can ensure companies comply with their regulatory obligations to inform customers within a timely manner.

However, implementation is held back partly because companies are intimidated by the prospect, and also by their own lack of knowledge. This is a new and emerging sector and there are plenty of horror stories about RPA projects gone wrong.

The technology is also often misunderstood. The most common mistake is to view it as an issue of compliance. In truth though, it is something which can be embedded into the fabric of an organisation. It makes everything faster and more transparent and in the world of financial regulation, in which regulators want to see the steps companies have taken to fulfil their obligations, this is an enormous bonus.

How to grab SMCR with both hands - Waymark Tech blog post

How to Grab SMCR With Both Hands

On this blog it often feels like we’re calling out examples of bad practice. So, it makes a refreshing change to highlight a company which is getting it right. With firms still getting to grips with the Senior Managers and Certification Regime, insurance provider GRP, is among the first to truly embrace it.

They announced this month that they have linked SM&CR compliance with people management practices to embed the rules into company culture. By bringing the two together, they say that the regulations can achieve their goal of genuinely transforming culture.

The Senior Managers and Certification Regime was originally introduced in 2016 and extended to solo regulated firms in December 2019. Its aim is simple; to encourage senior managers to take more personal accountability for their business actions and to improve corporate culture.

Like many regulations though, firms will be tempted to see this as a box ticking issue for the compliance department, and nothing else. What GRP is doing, is linking SM&CR to its recruitment practices.

They’ve introduced software with a standalone module which deals solely with SMCR compliance. It allows the firm to allocate responsibilities to managers, show where these responsibilities have been accepted as well as show evidence. It creates an audit trail for regulators and makes it easier for them to stay on top of their data requirements.

It shows the benefit of moving away from old Excel-based HR management towards high tech solutions which include compliance at their core. It allows the company greater oversight and to show that it is not only complying with the letter of the law but also the spirit.

This offers all sorts of benefits…

Firstly it reduces the administrative burden of compliance, but it also instills confidence in employees. One of the biggest fears is that SM&CR will cripple decision making. Managers may be terrified of taking any decision for fear they may be held personally accountable if it goes wrong.

By maintaining a clear audit trail it is easier to show not only who holds which responsibility, but also that each individual did everything they could to carry out their responsibilities. This reduces the fear factor and makes it much easier to satisfy regulators if they do come knocking.

Moreover, measures like this demonstrate that the company is taking its obligations seriously and regulators love this. The FCA has said it will be assessing the culture within a company as a sign of likely non-compliance.

So, from PR, risk, financial and regulatory aspects, SMCR can become an opportunity rather than a burden. It helps businesses go above – as well as beyond the requirements – which has additional benefits to their bottom line performance.

As with any regulation, different companies will take a different approach, but those who are more proactive stand to prosper.

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