RegTech and the law 

Working with developers of FinTech solutions, as well as investors and financiers, Ashurst's financial services team is committed to bringing innovative solutions to life to meet our client's evolving needs.  The financial services team works closely with the firm's newest initiative, Ashurst Digital Ventures, which supports the development of digital products for our clients.  Ashurst Digital Ventures leverages the latest technologies to incubate and accelerate digital product ideas through to commercialisation.  

Ashurst has partnered with Anthony Stevens, a leader in digital strategy and software development, to produce this third instalment in our series: RegTech and the law Part 2: Example Use Cases, which looks to provide relevant examples of how players in the business of regulatory compliance interact.

RegTech and the law Part 2:  example use cases 

There are RegTech solutions for hundreds of different use cases, and this can seem overwhelming for legal and compliance professionals not used to assessing or determining business requirements in a technology context, or wary of introducing additional solutions into their GRC framework. Here we have selected a few use cases across the Financial Services domain where RegTech solutions are being developed and applied.

Use Case #1 – managing a global financial institution’s diverse regulatory reporting requirements

A RegTech solution automatically captures pre-defined data to meet aggregate requirements from multiple sources into a cloud-based platform where further validation and reconciliation activities are performed. Data sets are then prepared into required formats and automatically delivered to the correct Approved Reporting Mechanism or Trade Repository to meet jurisdictional and asset class reporting requirements. Management dashboards provide visibility, performance monitoring and insight. 

Use Case #2 – identification, assessment and remediation of policies, procedures and content to ensure compliance with new or changing regulations

Constant regulatory change means organisations need to act quickly to determine impact and plan for adoption. Utilising big data, machine learning, artificial intelligence and workflow management, solutions are able to analyse regulations across multiple jurisdictions, extract rules, map them against an entity’s internal policies, procedures and responsible business units to automatically alert and identify owners to the actions required. Solutions range from discrete compliance areas such as content and marketing, to an enterprise wide focus.

Use Case #3 – addressing conduct risk management and mitigation within an organisation

An emerging area for RegTech solutions is utilising artificial intelligence to analyse employee communications and conduct across multiple channels to predict the likelihood of fraud and financial misconduct, and consider intent of employee actions within a specific context. Using natural language understanding, models analyse millions of communications across voice, chat, email and other structured and unstructured data, creating employee profiles, triggering alerts for investigation, and assisting clients to meet regulatory conduct reporting requirements.

Use Case #4 – streamlining corporate KYC procedures and meeting continuous monitoring requirements

Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements are time consuming yet fundamental to meeting AML and CTF standards when onboarding new clients. Current RegTech solutions assist with this requirement, providing aggregated data repositories combined with machine learning to vet entities and individuals against global sanction and watchlists, politically exposed persons and entities, and adverse media and enforcement reports, with real time monitoring and alerts when situations change. 

Use Case #5 – monitoring and reporting suspicious transactions in line with AML regulations 

The verification process in a distributed ledger creates an immutable, auditable electronic record, therefore blockchain transaction records contain identifiers of previous transactions, improving the traceability of suspicious activity, and ensuring tamper-proof records. This information could therefore be quickly shared with stakeholders, regulators and industry peers over a private blockchain to meet reporting requirements and alert the financial network to fraudulent or criminal activity.

Conclusion 

Ashurst believes lawyers have an obligation to operationalise law and regulation for their clients. This extends much further than merely providing technical advice. It means assisting clients to translate advice into clear and unambiguous policy, which in turn identifies and enables change to business process to ensure compliance. There is no doubt that the ability of an organisation to maintain regulatory compliance and competitive advantage is now inextricably linked to its ongoing investment and adoption of technology. Understanding the application of the use cases described above, and how RegTech can applied in their clients’ organisation, is now a key competency for lawyers to develop. 

jamie ng, ashurst

Sydney-based partner Jamie Ng is global head of finance, funds and restructuring and has over 15 years' experience in complex structured finance and derivatives transactions. Jamie has played a lead role in driving the firm's innovation agenda having introduced initiatives such as Ashurst's continuous legal process improvement framework known as "P90" as well as , as Co-CEO, Ashurst Digital Ventures, our digital product development business. Jamie has advised on some of the most complex, innovative and first-to-market transactions including DLT based capital markets transactions.

ANTHONY STEVENS, DIGITAL ASSET VENTURES

Anthony Stevens is the founder and CEO of Digital Asset Ventures (DAV). The co-founder of several start-ups, including cloud-based B2B commerce platform Devicedesk and regulatory compliance and third-party risk management platform 6clicks.io, Anthony was also former Partner and Chief Digital Officer at KPMG. In 2018, he published his first book, Chasing Digital: A Playbook for the New Economy, a comprehensive step-by-step guide to digital transformation, aimed at the leaders of pre-digital companies.