Category: News Page 1 of 5

Pension Provider Sees Compensation Claim Soar by 2,000%

Pension Provider Sees Compensation Claim Soar by 2,000%

Pension provider, James Hay, was hit with some surprise news this month as an appeal saw its payout over a pension delay soar by 2,000%. The case should serve as a reminder to any pension firm to stamp out any delays in the pension process.

What happened?

James Hay had initially been ordered to pay £2,000 in compensation to one of its customers, known as “Mr T” for this case, after the firm caused a delay in a pension transfer, causing him to miss out on what he hoped would be a valuable investment opportunity.

Mr T had been looking to transfer his small self-administered pension into a self-invested personal pension plan. As well as £220,000 in cash, he had cash and stocks with Barclays Stockbrokers (BSB) in his SSAS. However, after BSB notified him it would be closing its pension trader accounts after 30th June 2016, he emailed James Hay asking them to begin the transfer.

Mr T requested the transfer to go through before the Brexit referendum on 23rd June 2016, however this did not happen and it wasn’t until 19th August 2016 that £250,000 in cash made its way from James Hay to Mr T’s new SSIP with Hargreaves Lansdown. A week after that, six out of seven lines of stock were transferred to the new provider with the last line being processed on 3rd October 2016.

Because of these delays, Mr T argued that he had lost the opportunity to invest in stock markets after the referendum result which could, he believes, have represented an excellent investment opportunity. Remember, this was the morning which, as one investor described it, had ‘gold in its mouth’. Mr T had hoped he would have been one of those to benefit.

James Hay argued that it had carried out its duties in a satisfactory manner, although it admitted there had been two exceptions caused by miscommunication. The Ombudsman found that while there had been maladministration on the part of James Hay, the compensation should be set at only £2,000.

In explaining this figure, the Ombudsman said that the exact level of loss claimed by Mr T was not measurable. Mr T appealed, claiming that the compensation was not enough and that the Ombudsman should have taken into consideration how much money could have been made had the transfer happened in a more timely manner.

The court sent the decision back to the ombudsman saying it should identify when the money would have arrived without maladministration from James Hay. It should then consider what Mr T would have done with the money.

In this second finding, the Ombudsman found that the money should have arrived by 23rd June 2016, just in time for the referendum, and that Mr T would have invested the full amount in the FTSE 100 Index immediately after the leave vote. As such, it concluded the losses would have been much higher than originally thought.

Although it is impossible to say for certain what he would have done with the money or which stocks he would have invested in, the Ombudsman still determined that it was possible to make a reasonable estimate.

“If £250,000 had been invested when the FTSE Index level fell to 5,788, a profit of about £43,700 would have arisen when that Index rose to 6,800 in August 2016.”

Ombudsman, Anthony Arter

He therefore added, more than £41,000 onto the compensation in recognition of this lost investment opportunity. James Hay for its part has accepted the revised ruling and says it is “in the process of arranging the settlement with the scheme.”

Lessons to be learned

The ruling might have been a shock for the firm, but as with every penalty notice issued, it provides an opportunity for firms to learn from their mistakes. It shows that, not only can they be found culpable for delays in the transaction, but the ombudsman is willing to make an estimate of the likely losses the client would have incurred. For other companies, the lesson is simple. Don’t drag your heels on transactions. The results could be more damaging than you think.

FCA on Business Interruption Insurance

FCA Tests the Water on Business Interruption Insurance

A test case brought by the FCA, seeks to clarify wording used in business interruption insurance. If successful, it could have profound implications on almost 400,000 policy holders.

The FCA is bringing the case in order to end uncertainty around how pandemic related business interruption claims should be treated by insurers, and how any resultant losses should be assessed. As part of this, they will be examining the fine print of more than 40 insurers including Hiscox, Royal Sun Alliance, QBE and Ecclesiastical (the largest insurer for churches).

The case centres on a number of key areas of dispute including:

  • Denial of access: Many business interruption policies cover against losses incurred from being denied access to premises. This will have been a serious issue for many businesses which were forced to close during the height of the pandemic. Some also cover losses incurred because premises have been closed by public authorities, due to an emergency which endangers human life.
  • Losses: In a successful claim, losses will need to be assessed against what the business would have earned if the interruption had not occurred. In this case, the uncertainty surrounds whether this includes what the business would have earned had there been no pandemic, or what it would have earned had it stayed open during the pandemic. If it’s the latter, many businesses, such as pubs, will see relatively little benefit as the pandemic would have reduced business to near zero even if they had been able to stay open.
  • Notifiable disease: A number of policies will provide businesses with cover if there has been a notifiable disease at or near their business, within a specific radius.

Business interruption insurance has been top of the regulator’s agenda during the pandemic. According to a report from McKinsey, 60% of small and medium sized businesses feel their insurers were not transparent over how COVID-19 would affect their policies.

Many who had business interruption cover will have assumed they’d have had some protection from their insurers only to discover that diseases such as COVID-19 are specifically excluded.

Confidence and trust in the sector has fallen with a third of businesses saying they will stop buying business interruption cover altogether.

It’s a difficult balancing act for the insurance sector. On the one hand, insurers were keen from the outset to make it clear that they would not be on the hook for any business interruption pay outs.

A spokesperson for Ecclesiastical said:

“Our business interruption policies were not designed to provide cover for pandemics and have specific exclusions against infectious diseases like Covid-19 within them.”

Even before the lockdown, the industry was making its stance clear. The Association of British Insurers asserted at the time that:

“Irrespective of whether or not the Government orders the closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed down by the coronavirus.”

However, insurers are also keen to avoid severe reputational damage as a result of the pandemic. Ecclesiastical says it has provided some measures of support including enhanced cover and an automatic extension in cover for 30 days beyond renewal to prevent customers becoming unintentionally uninsured.

The argument boils down to definitions. While the FCA accuses insurers of ‘cherry picking’, they accuse the regulator of blurring the lines between distinct items.

Jonathan Gaisman QC, acting for Hiscox, said:

“We need to be aware that when the FCA invokes what the parties must have meant, the intention or at least the effect of that phrase is often to camouflage those points in its argument where there is nothing but their assertion.”

Court proceedings are now under way with a decision expected in September. The decision will be watched closely by businesses and the insurance sector alike.

ICO Reports on First Sandbox Projects

ICO Reports on First Sandbox Projects

The ICO has released the first two reports from its regulatory sandbox about innovation in data protection. Launched in September last year, the scheme trialed a number of innovations which sought to use personal data to deliver a variety of new services, while still maintaining data protection requirements.

Many of the projects have been delayed because of COVID-19, but these first projects include a ground breaking study in biometrics at Heathrow and a further education not-for-profit company, JISC. Both can shed light on the potential of data and the challenges involved in maintaining privacy.

Heathrow’s biometric passports

Heathrow’s experiment relied on using biometrics such as facial recognition to automate the passenger journey and ensure people can move through check-in, baggage drop, and onto the aircraft without having to constantly stop in order to show their passports.
Their study had to confront two important data issues. The first was who controlled the data. Heathrow would be considered a joint data controller for the activities and so would have to ensure complete security and transparency about what data it had.

Under GDPR rules it would also struggle to achieve compliance through the argument of a legal obligation, and so would have to seek explicit passenger consent for using the data throughout the passenger journey. This can be difficult to achieve in a system which is intended to minimimse interruption to the passenger’s journey throughout the process.

Both Heathrow and the ICO agreed that affirmative action completed by the passenger would not be a compliant means of shorting an express statement of explicit consent.

In the light of the trial then, Heathrow has decided to postpone its plans until it can come up with a GDPR compliant process for automating passenger journeys.

Student well-being

The JISC project meanwhile, aimed to protect student well-being while showing how the data about their activities could be used to improve the services on offer.

It faced issues around data protection as well as purpose compatibility. It would have to assess whether the data they intended to use would be fit for the original purposes for which it was collected.

Thanks to COVID-19 related delays, one aspect of the project could not be met, a report into the mental health analytics which both sides agreed would take place outside of the sandbox process.

Universities using data would have to demonstrate compliance through the accountability principle of GDPR which would include identifying the lawful basis for using the data and providing adequate notification notices to all students including those under the age of 18.

According to the report, both sides agreed that universities would rely on Article 6 of GDPR in which is covered public tasks or legitimate interests for the processing of certain categories of personal data.

Data potential

Both projects demonstrate the opportunities and risks associated with data. Much has been written about the use of facial recognition and data, in general, to streamline the process of fighting your way through the airport. As anyone who has endured a tough route through check-in would agree, anything that can make this easier will be welcome.

But systems have always run into the issue of data identification and consent, and this appears to be something Heathrow is yet to crack. GDPR sets the bar extremely high in achieving explicit consent as well as maintaining the necessary transparency and reassurance about how data will be used, and how and when it should be deleted.

By ironing out these issues and collaborating between regulators and innovators, sandbox initiatives such as this will be crucial in blending the potential of data with its regulatory obligations.

What is going on at the SFO?

What’s Going on at the SFO?

The Serious Fraud Office is reviewing its operations after a high-profile embarrassment in court. So what’s going on and can the biggest fraud regulator be fixed?

“Like a teenager who has found a new friend.” That’s how Judge Martin Beddoe described Lisa Osofsky, director of the SFO, as behaving in a high profile international bribery case. It’s the latest in a long line of negative headlines for the regulator which has seen some start to question its existence.

So, what went wrong and can anything be salvaged?

The latest case relates to the regulator’s prosecution of executives from Unaoil for offering bribes to secure lucrative contracts. The defence tried to get the case thrown out over Osofsky’s communications with David Tinsley, a former FBI agent and now private investigator working for the defence.

In a series of what were described as ‘flattering’ texts between the two sides, Tinsley appeared to be attempting to sweet talk Osofsky into going easy on his clients. She in return appeared to be trying to steer him towards persuading his clients to plead guilty.

It worked. Tinsley is said to have approached his clients behind the backs of their legal team claiming that they may receive a more lenient sentence if they agreed to plead guilty. The defence argued that these communications made it impossible for their clients to receive a fair trial.

Judge Beddoe dismissed the claim but upheld the criticism of senior figures within the SFO. The regulator has announced it will now undertake a review to see what learnings might come.

However, this is not the first time in recent memory that the SFO has been caught short. The last few years have been marked by high profile failures and long drawn out cases. There was the acquittal of former Barclays executives accused of conspiracy to commit fraud; there was the failed prosecution of former employees of Sarclad and Guralp Systems with the company reaching a deferred prosecution agreement; and the collapse of the Tesco fraud trial.

Such high profile failures prompted Compliance Week to suggest companies accused of fraud might decide to take their chances at trial rather than take the safer DPA option.

The SFO’s reputation has taken a pounding and prompts renewed calls for a fundamental overhaul of the organisation. Some have been calling for the regulator to be merged with the National Crime Agency.

Osofsky has been vocal in opposing such a move, but this latest episode doesn’t do her credibility any favours. Either way, the recently announced review needs to be much more than a box-ticking exercise. With experts warning of an increased risk of fraud in the fall out from COVID 19 the UK needs an anti-fraud regulator which is at the top of its game.

COVID-19: Opportunity Knocks for RegTech

COVID-19: Opportunity Knocks for RegTech

Every cloud has a silver lining. When COVID-19 hit, banks faced an enormous logistical challenge of shifting towards a secure, and efficient work from home environment. However, after the initial pain, they are now seeing the benefits as the pandemic helps accelerate the move towards digital.

Even before COVID-19 and all the chaos that came with it, digitisation represented the future. However, progress was slow. Even those organisations that accepted the need to evolve to keep up, were slow on the uptake. Old practices remained. Teams either failed to see the urgency or were suspicious of new technologies. COVID-19 meant that, like it or not, many had to make the leap and any concerns over security had to be resolved.

The effects have been rapid. Online banking has boomed as customers are shut out of branches. Even those who might have been reluctant before the pandemic found they had little option during it. Equally, teams have embraced remote working with video conferencing and online document editing becoming the norm.

In both cases those who had been reluctant adopters are realising the benefits. Employees who would previously have preferred to print and manage documents by hand are finding out how easy it is to quickly edit and send them online. Firms report relatively few home printers being used which not only reduces paper waste but without so many documents to potentially go missing, it improves security.

Across the board, people involved in digital transformation feel as if a dam has been broken. RegTech had already been growing… Investment doubled between 2017 and 2018 and projections foresaw rapid growth over the next five years. As with other areas of technology, progress was always stymied by a lack of urgency, fear of the new and legacy infrastructure.

Coronavirus has, in various ways, helped to dispel each of these. The most important is trust. In order to work effectively, RegTech firms have to convince banks to allow them to work with their most sensitive data. This carries significant procurement and compliance risk, but with increased use of technology and the sharing of data, it is helping banks to become more comfortable with the concept and to hone their due diligence.

At the same time, with financial and manpower issues becoming critical, the cost and resource savings from automated RegTech solutions also starts to become more appealing. As such, COVID-19 represents a moment of opportunity for the RegTech sector and many companies appear to be grasping this with both hands. Some have been offering open access throughout this pandemic, while others have been cooperating to improve the value they can offer their clients. Waymark Tech has been one of those providers offering free access to COVID-19 regulatory updates.

The result creates enormous opportunity for everyone. Banks have been forced to take the leap, while the specific nature of life during and after COVID-19 has increased the need for automation and technology. Going forward, technology will become even more important in maintaining the know-your-customer provisions, anti money laundering and fraud prevention.

Hackers Have the Financial Sector in their Sights

Hackers Have the Financial Sector in Their Sights

A number of hack-for-hire firms are using the COVID-19 pandemic to infiltrate financial services firms. Defences are not always good enough though.

Two reports this month highlight the problem of a rapidly growing hack-for-hire market which is targeting corporations, government institutions and not-for-profits around the world. It’s a yet another addition in the cyber war powered by highly professional and well-funded criminal organisations – and given the perfect environment by Coronavirus to step up their efforts.

First came a report from Google which identified numerous hack for hire firms, spoofing the World Health Organisation to target business leaders and companies in the US and UK. The report found hundreds of examples of Coronavirus-themed attacks which use WHO branding and encourage individuals to sign up for direct notifications for important announcements. The emails contain a link to an attacker-hosted website that closely mirrors the official WHO site featuring fake login pages, all prompting users to hand over their personal details.

In a blog, Google said:

“Generally, 2020 has been dominated by COVID-19. The pandemic has taken centre stage in people’s everyday lives, in the international news media, and in the world of government-backed hacking.”

Meanwhile, a second report from Citizen Labs highlighted a shadowy hack-for-hire organisation which it termed “Dark Basin” linked to an Indian tech firm, BellTroX InfoTech Services. As well as financial institutions, this group had been targeting rights groups and not-for-profits including Greenpeace, The Rockefeller Family Fund, and the Union of Concerned Scientists as well as a number of organisations involved in the ExxonKnows campaign which asserts that Exxon knowingly hid information about climate change.

Their investigation kicked off in 2017 when a journalist noticed a phishing attack and asked them to investigate. Their study linked the attempts to a network of URL shorteners operated by the group that they came to call Dark Basin. They identified nearly 28,000 additional URLs containing the email addresses of targets around the world. This helped researchers build up a map of who they were targeting and warn some of them.

The evidence linking this group to BellTrox was not hard to find. Employees of BellTrox were found uploading screenshots and taking credit for the attacks on social media. A number of individuals claiming to work for BellTrox could be found on LinkedIn listing services such as email penetration, exploitation and corporate espionage.

Hacking is also becoming an increasingly common occurrence in corporate disputes. The recent case between the Ras Al Khaimah Investment Authority and Farhad Azima included allegations in which Azima claimed RAKIA used the services of hackers to access his emails and leak documents online.

The reports shed light on a world in which hacking is a growth industry backed by well funded and highly professional companies. The underhanded nature of this world makes it extremely difficult to trace responsibility and the current situation makes all companies uniquely vulnerable.

All the sophisticated cyber security technology in the world can be rendered useless by a convincing email. In an environment of high uncertainty in which companies are relying on guidance from trusted organisations such as the WHO, phishing emails can become more effective than ever. All it takes is one click on a malicious link and the hackers are through the defences.

Financial institutions, as always, find themselves in the firing line. If they are breached, they face financial and reputational losses as well as compliance risks.

To counter the attackers, therefore, companies need to get their defences in order, ensure everyone in the organisation is aware of the latest attacks, and that robust measures have been put in place.

The hackers are coming and they have better infrastructure and resources than ever.

Building effective defences will be one of the key challenges of the COVID-19 crisis.

What Can We Expect From the New Head of the FCA?

What Can we Expect From the New Head of the FCA?

Chancellor Rishi Sunak overlooks Chris Woolard and chooses Nikhil Rathi to take the FCA forward into the post COVID-19 world.

There’s a new face at the FCA, but it’s not the man most expected. After a relatively positive stint as interim Chief Executive, Chris Woolard had been favourite to take the role on permanently. However, the decision to shun him in favour of Nikhil Rathi, boss of the London Stock Exchange, could have a number of implications for the future direction of the regulatory watchdog.

Woolard shunned

Woolard had been busy during his time as interim boss. He took on insurers who attempted to shirk responsibility for business interruption cover, he brought in his own QCs and hired law firm Herbert Smith Freehills to help the regulator deal with legal complexities and launched an inquiry into sub-prime lender, Amigo.

However, there is a sense that the FCA needs to be shaken up after the Woodford savings crisis, its failure to pre-empt the London Capital & Finance mini bonds scandal and the slowness of its response to malpractice in the investment sector.

Rathi, by contrast, is an outsider to the FCA and may bring a much needed freshness to the role while his track record of working in the Treasury may also have played a role in Sunak’s decision. Certainly his time at the Treasury may well help him to handle some of the upcoming challenges such as Brexit, although others may fear it makes him a little too close to Government.

The coming years will bring a number of challenges which could create friction between the FCA and Government. Rathi will do well to ensure he is seen to keep his employers at arm’s length and avoid any implication of political influence.

What to expect

As he takes his role, Rathi arrives at a pivotal time. The COVID-19 crisis has placed an enormous pressure on the FCA in maintaining its operations. It has already had to reset its priorities to ensure it can maintain the right focus despite the restrictions of the pandemic.

The financial world faces winds of change in the shape of new technology, climate change and a desire for greater accountability and better conduct. Each of these issues were front and centre of his attention as he set out his goals for the future.

The regulator also is fighting for its reputation. It has faced considerable criticism over the past few years and, like other regulatory watchdogs around the world, is under pressure to improve oversight and accelerate the conduct of cases. Rathi will need to hit the ground running and show that he can steer the regulator through the choppy waters which are on the way.

What Can We Learn From the Commerzbank Fine? - Waymark Tech Blog

What Can We Learn From the Commerzbank Fine?

The Watchdog’s second biggest fine for failing to have proper financial controls in place should serve as a warning to the rest of the sector.

The FCA has made anti money laundering one of its key focuses for 2020 and this month it showed it means business with a £37, 805,400.00 fine to Commerzbank London for failing to implement proper controls over a five year period. It’s the second biggest fine of its kind and offers some key lessons for the wider sector.

Listen to the regulator

The scale of the fine is partly down to the fact that the Bank was aware of the problem, had been warned by the regulator but failed to take action. The FCA said it had warned Commerzbank on three separate occasions about the risk of financial crime going undetected but had “failed to take reasonable and effective steps to fix them.”

Maintaining due diligence

The regulator found that the bank failed to undertake effective due diligence checks on clients. As of March 1st 2017, checks were overdue on 1,772 customers. In the meantime, many of these customers were able to continue doing business with their London branch through their Exceptional Control Scheme which the FCA argues got out of hand.

The rules apply to you

AML requirements have toughened up in recent years, and regulators have very publicly stated this is a priority. However, many financial institutions, for one reason or another, haven’t fully understood the implications of the changes or that these rules apply to them. With the EU’s sixth anti money laundering directive coming into force in December, firms will have to continually update and review their measures to maintain compliance.

Getting the technology right

Companies are increasingly leaning on automated compliance monitoring systems. However, these are only effective if functioning properly. The FCA noted a failure to address known weaknesses with the automated tool for monitoring money laundering risks. In 2015, the bank noticed that 40 high risk countries were missing from its tool and 1,110 high risk clients had not been added.

Enhanced due diligence

Companies will be coming under increasing pressure to ensure their due diligence processes are as good as they possibly can be. This means enhanced ongoing monitoring of any situation which by its nature presents a high risk of money laundering or terrorist financing and maintaining up to date data and documentation.

Prompt action

One area where the bank performed well was in promptly agreeing to resolve the issue. The FCA says that the lender agreed to make changes at an early stage of the investigation, earning itself a considerable reduction of the fine. Without these changes, the FCA says the fine would have been £50 million.

Cooperation is seen in a positive light by the regulator. They are looking to use fines to encourage change rather than as a blunt tool of punishment. Those firms that can demonstrate an understanding of the problem and a willingness to change, will receive kinder treatment.

Most importantly, this fine, coming quickly on the heels of Standard Charter’s £1.1bn fine for violating sanctions and anti money laundering rules, shows regulators are upping their games. The UK is continuing to align itself with the more aggressive approach taken towards anti money laundering within the EU in recent years. Although we do not know how closely the UK will continue to be aligned with the EU after Brexit, their actions do nothing to suggest their approach will weaken.

Why third parties present a risk - Waymark Tech blog

Why Third Parties Represent a Risk

With digital technology evolving by the day, more and more financial institutions are turning to third parties to handle an array of business functions. However, this can open up regulatory vulnerabilities which can be easy to miss – as Raphaels Bank discovered to their cost last year.

Third party risk

The FCA issued the bank with separate fines totalling £1,887,252 for failing to manage their outsourcing correctly. In 2015, one of Raphael’s card processor providers suffered a technical incident which caused the complete failure of the authorisation and processing services it provides to Raphael. This meant 5,356 transactions were not authorised at sales terminals.

The FCA investigation found that Raphaels failed to implement adequate processed to enable it to understand and assess the business continuity and disaster recovery arrangements of its provider. In particular, they had not assessed how that provider would support the continued operations of its programmes during a disruptive event.

Back in March, the FCA published new research on cyber resilience in the financial sector which included statements on third parties. Their research stressed the need for businesses to consider the risks and weaknesses of third party systems and resources when assessing their cyber resilience measures.

In January, they also released a paper explaining the implications of operational resilience for firms using third party service providers. We have more details of the FCA’s stance on the Global Regulatory Platform, but the essential message from the FCA is that every firm has the responsibility for managing its third parties. While you might be surrendering control of operations and data, the responsibility rests with you.

That means that if your third party experiences a problem which results in harm to your customers, you may be held accountable for the damage which results.

This has major implications for any company working with third parties, particularly in relation to their exposure to cybercrime. Data obtained last year from accountancy firm RSM under the Freedom of Information Act, found that a fifth of all cyber breaches occurred due to third parties.

Lessons to be learned

The lessons are clear. As a firm, you should monitor all third parties you’re working with. Each one may potentially represent a vulnerability if their processes and systems are not up to scratch.

Extensive due diligence should be conducted before entering into an agreement. You should have a full understanding of what redundancy measures are in place in the event of any disruption of system failure. You should establish how resilient the company is to cyber attacks and what measures are in place if they suffer a breach.

Failure to undertake these precautions will leave you vulnerable to fines from the regulators and in the age of GDPR, these fines can be considerable.

How AI can help boost compliance - Waymark Tech Blog

How AI Can Boost Compliance

According to the Thompson Reuters, Cost of Compliance report, the most common cited problems by compliance professionals are increasing regulatory burden, compliance with anti money laundering requirements, culture and risk, availability of skilled resources.

Those problems are likely to become even more serious after COVID-19 as financial services companies seek to maintain business resilience throughout this unprecedented crisis. Costs will be cut and the compliance department will be one of the first to face scrutiny.

This was already happening before the outbreak. According to Accenture, most compliance departments are having their budgets cut and are being presented with cost reduction targets.

This comes despite the compliance department moving to the fore in recent years. Since 2008, regulators have been tightening their oversight and are constantly adjusting guidance – and bringing in new regulations. Each update will bring new requirements for firms to comply with. Keeping up to date with the evolving landscape and ensuring your teams are doing everything they can to stay the right side of the rules is a constant struggle.

Secondly, the rise of cybercrime and the increasing tendency of businesses to handle data remotely has also seen regulators ramp up the pressure on firms to ensure clients have control over their data, to keep that data safe and identify where breaches occur as quickly as possible.

Thirdly, the need to comply with regulations and maintain the integrity and resilience of systems has seen a dramatic increase in the data management and administration requirements of firms. More than ever, they need oversight of their key systems and to process information and control their data.

For example, if a client asks for their data to be deleted or altered, as they are able to do under GDPR, firms must be able to retrieve that information as quickly as possible and feel certain that they haven’t left some of that client’s personal data lying around somewhere.

Equally, MiFID II requires that they maintain a complete record of all communications with clients over business dealings. They will have to ensure this data is stored safely and can be retrieved at short notice to satisfy regulators.

Compliance teams will also need to maintain a transparent trail of evidence demonstrating what steps they have taken to comply with the regulations. The burden is heavy. However, all this work drives zero revenue into the company which is why compliance is traditionally one of the first candidates to be trimmed.

The challenge is familiar: to do more with less. At a time when workloads are being upped they are being asked to cut costs.

Unsurprisingly, therefore, firms are investing in AI and automation technologies which can variously reduce costs, streamline operations, improve oversight and reduce the risks of human error.

Some of the most common areas in which AI and automation are being used include:

Monitoring regulatory sources:

Applications can constantly monitor regulators for changes and updates to the regulations. They can notify the compliance team who can then determine what action they should take. Systems use natural language processing (NLP) algorithms to analyse news releases and extract salient information.

Checking compliance with regulations:

Both firms and regulators are making use of applications which monitor a firm’s compliance. Rather than spending time on audits, these applications can alert compliance officers and authorities to breaches, record evidence and prompt the user to take action.

Processing large quantities of text and other data:

New regulations normally get to the market in the form of lengthy documents, often comprising hundreds of pages. Compliance officers and business leaders may not have the time to go through all documents. However, applications can use natural language processing to read through the documents and extract the key actionable highlights.

Such systems are not fool proof. They rely on the AI working as intended in order to deliver value. By automating systems, businesses assume they are eliminating the risk of error. However, they are placing a huge amount of faith in the algorithms underpinning the application. Due diligence will be essential to ensure systems can deliver on their promises.

Even so, automation can significantly improve outcomes for businesses. On the one hand they will be able to reduce the time and attention spent on compliance, while on the other, the increased oversight they offer will provide value in many different ways. It will shine a light on areas of the business which hitherto remained in the shadows. As such, they can even help a business improve performance, cut risks and identify revenues. They help take compliance from being an administrative function and turn it into a proactive tool in driving the business forward.

If you would like to understand more about how AI can help your compliance efforts, please get in touch and we will be happy to guide you. We can offer a trial to demonstrate just how effective our systems are.

Please contact Mark for enquiries.

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