In light of the recent US election result, with a Biden victory confirmed, CUBE’s Rob Fulcher sat down with compliance luminary, Mitch Avnet, CEO of Compliance Risk Concepts, to unpick what a Biden win might mean for the future of finance. During the webcast, the audience were encouraged to submit any pressing questions.
In the below extract, Rob and Mitch discuss whether we’re ever likely to see financial regulators insist that financial institutions use regulatory technology in their compliance programs.
At the moment firms are implementing technology because it’s ‘good to have’ and it’s helpful. But do you think there’ll be a move from the regulators to say ‘you need to have this’ or ‘your compliance systems aren’t good enough if you don’t have technology in place’?
Mitch Avnet: Great question. I think part of where firms get frustrated with US regulators is when you ask a very pointed question like that and the SEC or FINRA is never going to tell you how to satisfy your program. They’re going to tell you that you have to have a program in place that is right and calibrated to who you are and what you do. They’re not going to tell you how to go from A to B.
With that said, I think we can all agree that investments in technology can be very impactful to organisations, especially if it takes people out of doing the hunting and gathering of information every day and enables them to move into more value-added roles within compliance or within an organisation where they’re actually serving more in an advisory capacity.
We have a huge ask on us to gather massive volumes of information and figure out how that ultimately impacts our organisation.
Any time you rely on technology to help you there, I think that’s a good thing. Especially it if helps you to redeploy your capital assets in a positive and impactful manner. Having said that, I would be hard pressed to think of any regulator that would tell you that you need to do that. In fact, I would take it a step further, and say that I would never ask a regulator how I should run my program.
Rob Fulcher: To add to that, to tie it back to today’s topic; if there’s a relationship between the Administrations and the financial services sector, what we saw under Obama as a reaction to the global financial crash was all these new regulations. Within the financial services sector we saw a reaction in terms of budgets and spend and resources coming into place – and new technologies.
What we have found at CUBE over the last four years is that some of those budgets have been pulled back, but yet the need to address the regulations has increased.
Essentially firms are being asked to do more for less – which actually has been good for CUBE and other technology providers and service providers out there because there’s this need to become more efficient.
CUBE is looking at automating regulatory monitoring, classification of regulations, mapping of regulations to policies and controls and internal taxonomies. In the past that was done by excel and people and I agree Mitch, you’re never going to get a regulator that will come in and say, ‘you need to look at CUBE’ or ‘you need to look at this new technology’. But I think generally there’s an acceptance that managing everything through spreadsheets and trying to introduce an auditable workflow through spreadsheets and files is an old technique and an old process. And when you’re looking at Tier 1 firms across multiple countries, it’s very difficult to manage regulatory change in that respect.
MA: I think that’s a great point. And unfortunately, you see some of the biggest investments and the best compliance programs coming out of where firms have been hit by a regulator because their processes broke down or their processes couldn’t keep up with the pace of the business.
So, what happens in the most part – to be completely candid and realistic here – is that most firms will not be altruistic and make those investments upfront because they want to have the best compliance program or regulatory change management program money can buy. If you work in a firm like that then that’s amazing. But it’s human nature – you get religion when you get slapped. And depending how badly you get slapped the more religion.
In all seriousness, the best compliance programs come out of the worst regulatory situations. And people know that. To use a line from a holiday song – they’re not doing it ‘to be good for goodness sake’ they’re doing it because they’ve been mandated to do it. In terms of corporate, social responsibility and who you are and how you present yourself to the investing public, does that look good? No. Investors, clients, they want to know that you have those controls and that governance in place.
Firms put the money where the revenue generating projects are and it all comes down to how you build the business case to show that putting the infrastructure in place, having the processes matched to technology to automate those workflows is going to make you a profit centre.