In previous blogs in this series, we have reviewed the expansive potential of regulatory technology (RegTech) and how industry initiatives can facilitate the growth and adoption of RegTech. In this blog, we discuss how RegTech can thrive as a shared utility.

A shared utility model for RegTech can help financial services firms lower costs and gain quicker access to the latest RegTech solutions and developments. Rather than each financial institution managing its own solution, they can subscribe to shared utility services managed by third parties. Whether firms require access to a centralized Know Your Customer (KYC) repository, market or regulatory data, cloud technology and open platforms are key to the creation of standardized shared utility functions.1

In addition to utilizing cloud technology, banks and firms could send anonymized, desensitized data to a centralized utility. Taking advantage of large datasets to develop and shape algorithms using machine learning, the resulting shared utility would benefit all those using it. In the wider sense, this would contribute to a better RegTech ecosystem for more effective compliance. 2

Industry utilities can also drive the standardization of data and simplification for regulatory compliance.3 For example, the Association of National Numbering Agencies (ANNA) has been driving the creation of an industry over-the-counter (OTC) ISIN (International Securities Identification Number) generation service.4 Where similar rules exist for different regulations (Financial Markets Infrastructure Act, Markets in Financial Instruments Directive (MiFID) II, and European Market Infrastructure Regulation (EMIR) as examples), a rules engine can be built and subscribed to as a shared utility.

Indeed 2017 is deemed to be a challenging year which includes ongoing remediation, implementation and/or top down assessments of:

  • Money Market Fund Reforms (2016)5
  • FATCA (Foreign Account Tax Compliance Act) Withholding Regulations (created in 2017)6
  • International Financial Reporting Standards 9 (January 1, 2018 deadline)7
  • Basel III (Revised Leverage Ratios, Enhanced Capital Requirements – January 1, 2018 deadline)8
  • MiFID II (January 3, 2018 deadline)9
  • General Data Protection Regulation (May 25, 2018 deadline)10
  • Fundamental Review of the Trading Book (December 31, 2019 deadline)11

While shared utilities themselves present their own challenges including security, maintenance, and data quality, any RegTech solution that simplifies compliance processes, pools compliance functions and synchronizes rules (where possible), would help improve a bank’s core processes and allow for efficiency gains.12 One RegTech firm leading the way in this space is Enforcd Limited, a firm providing independent regulatory data to help firms identify, manage and mitigate conduct risks they face globally.13 

In the next blog in this series, we will look at some of the ways firms can encourage the development and adoption of RegTech. 

 References:

  1. “RegTech in Financial Services: Technology Solutions for Compliance and Reporting,” Institute of International Finance, March 2016. Access at: https://www.iif.com/system/files/regtech_in_financial_services_-_solutions_for_compliance_and_reporting.pdf
  2. “identityMind’s New Platform Version makes RegTech and Machine Learning Accessible to All,” IdentityMind, March 7, 2017. Access at: https://www.iif.com/system/files/regtech_in_financial_services_-_solutions_for_compliance_and_reporting.pdf
  3. “RegTech in Financial Services: Technology Solutions for Compliance and Reporting,” Institute of International Finance, March 2016.
  4. “Amazon Web Services and Datapipe Selected as Infrastructure Providers for the ANNA Derivatives Service Bureau for OTC ISINs,” ANA Derivatives Service Bureau, March 13, 2017. Access at: http://www.anna-web.org/wp-content/uploads/2017/03/DSB-Infrastructure-13032017.pdf
  5. “Money Market Funds,” SEC Spotlight, Securities and Exchange Commission. Access at: https://www.sec.gov/spotlight/money-market.shtml
  6. “IRS opens 2017 with new FATCA agreements and regulations,” RSM US LLP, January 23, 2017. Access at: http://rsmus.com/what-we-do/services/tax/international-tax-planning/irs-opens-2017-with-new-fatca-agreements-and-regulations.html
  7. “IFRS 9 Financial Instruments (replacement of IAS 39,” IFRS. Access at: http://www.ifrs.org/Current-Projects/IASB-Projects/Financial-Instruments-A-Replacement-of-IAS-39-Financial-Instruments-Recognitio/Pages/Financial-Instruments-Replacement-of-IAS-39.aspx
  8. “Basel III leverage ratio framework and disclosure requirements,” Basel Committee on Banking Supervision, January 2014, Access at: http://www.bis.org/publ/bcbs270.pdf
  9. “MIFID (II) and MIFIR,” European Securities and Markets Authority. Access at: https://www.esma.europa.eu/policy-rules/mifid-ii-and-mifir
  10. “Reform of EU data protection rules,” European Commission. Access at: http://ec.europa.eu/justice/data-protection/reform/index_en.htm
  11. “The Fundamental Review of the Trading Book: An Overview,” FinReg Alert, October 19, 2016. Access at: http://www.finregalert.com/the-fundamental-review-of-the-trading-book-an-overview/
  12. “RegTech in Financial Services: Technology Solutions for Compliance and Reporting,” Institute of International Finance, March 2016. Access at: https://www.iif.com/system/files/regtech_in_financial_services_-_solutions_for_compliance_and_reporting.pdf
  13. Enforcd Limited website. Access at: https://www.enforcd.com/

Visit www.accenture.com/RegulatoryCompliance for latest insights on regulatory remediation and compliance transformation.

Disclaimer

This blog is intended for general informational purposes only, does not take into account the reader’s specific circumstances, may not reflect the most current developments, and is not intended to provide advice on specific circumstances. Accenture disclaims, to the fullest extent permitted by applicable law, all liability for the accuracy and completeness of the information in this blog and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professional.

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