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CRTA Tech Talk: managing global regulatory challenges – an extract

As part of an informal Q&A, the CRTA’s Paul Childerhose sat down with Nick Bray, CUBE’s Senior Business Manager in Canada, to discuss regulatory obligations, cross-jurisdiction standardization, and the appetite for technology within Canadian financial services. The below is an extract from the full interview.

PC: Given your experience with regard to the supervisors and global regulatory bodies within financial services, what are some things you’d like to see them do to ease the burden on the industry in relation to regulatory compliance reporting?

NB: That’s a tricky one. First and foremost, I wouldn’t call it a burden. It’s the responsibility of the regulators, supervisors etc to protect the consumer – whoever that consumer might be.

I don’t think it’s so much about easing the burden, but more about making it easier to understand the requirements and really syncing up with one another. Those are two of the requests we currently hear a lot from customers, because they’ve got regulators looking at things from a slightly different standpoint, whether it’s jurisdictional or federal or provincial – or whether it’s just the same requirement that’s looked at slightly differently for corporate services functions or something. They all like to talk about privacy and fraud – the more they can sync up on that and clarify expectations, the better it’s going to be.

If we now look at large banks in Canada that operate across global jurisdictions, as well as provincial jurisdictions, and think about standardisation from a regulatory perspective. From your perspective, are you doing a lot of work on standardization and developing a common vocabulary or taxonomy on how these regulations need to be applied within a financial institution? What do you think about standardization within the industry?

As much as the banks say they want to tackle this – wealth, insurance, AML – the challenge is that as you get close to a solution things become proprietary very quickly. A lot of the taxonomies and common concepts that are being developed then start to be diluted. So, the utility of them starts to wear off and what is an unbelievably significant initiative to help alleviate some of the complexity becomes hard to manage. That falls into the hands of the vendors.

I think the key there is trust. In a lot of cases, you’ve got all the semantic jargon out there AI, NLP, ML, etc. Its unbelievable technology and it’s essential to the compliance function, but we’ve got to be able to build that trust to ensure that the corporations are comfortable consuming that.

Exactly to that point – establishing that standard taxonomy is more than just being able to pull out keywords and phrases from regulation. There’s got to be more intelligence to it than that. That’s something that vendors are now aspiring to do, but I think it’s going to take building out that trust with the big firms to be able to see that evolution truly occur. We’re nearly there, it’s just getting over that final hump. And now, with the current environment, there’s a little bit more of a hump to get over. But I think we’re going to get there, and we’ve got a lot more confidence and curiosity going into that.

So Nick, from your vantage point working for a UK based company that came out of the Lehman crisis – how mature, or immature, do you think firms are in Canada with respect to utilising technology as part of the compliance value change? Can you give me a sense of where we are in this market in comparison to some other jurisdictions such as the UK?

At CUBE we tend to go ‘big bank’ and try to apply new technology and new resources to everything. In Europe, we find it’s a bit more segmented with regard to using technology to resolve specific problems, be it cyber, privacy, AML, etc.

So, one thing you see in Canada is that having governance risk and compliance procedures in place has been well adopted. That started probably back, in earnest, in 2011—2012 when all the companies were first adopting technology. However, a lot of that is focussed on workflow and getting everybody involved; having an operating model that can see across the different lines of the fence or across the board and ensuring that everyone operates together.

I think the missing component from a maturity standpoint is in automation. And a lot of that, especially on the RegTech front, can help when it comes to identifying change and then being able to incorporate it into your ecosystem or infrastructure so that you don’t have to spend all your time identifying the change. Instead, you spend your time actioning the change downstream, getting the appropriate people involved, and raising awareness.

Adopting technology to really help to automate and embrace the new componentry with AI and ML and NLP I think is going to be really key to help the Canadian market evolve to where it needs to be. That’s not to say it’s replacing GRC – it’s accelerating and improving GRC by layering new technology on top of it, especially on the regulatory side or if you look downstream on the fraud and financial crime side.

Stay tuned for the full video…

CRTA | Canadian Regulatory Technology Association Paul Childerhose built his career in financial services at RBC, before moving to Scotiabank and then into consultancy work. He is a strategic adviser to the Canadian RegTech Association and has more than 20 years of financial services experience.