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Compliance Week On Compliance

Compliance pros doing more with less

The hiring boom prompted by the Financial Crises is over. According to a recent Compliance Week Reporter Joe Mont, compliance officers are doing more with fewer resources in an effort to make their departments smarter, not bigger.

Key is the adoption of new technologies, including data analysis and automation, artificial intelligence, blockchain, robotic process automation, natural language learning, cloud-based services, and machine learning. All these are designed to permit compliance professionals to better predict trends, flag anomalies, and, most important, proactively avoid offending the regulators.

According to Mont, compliance professionals seek to automate routine tasks to improve fraud detection audits, anti-money laundering protocols, and know-your-customer screens. In a survey of 118 compliance professionals, Compliance Week found that exactly 50 percent indicated they already were evaluating options for adding or upgrading their compliance tech, another 19 percent were currently upgrading, and just 14 percent said they were not changing anything at this time.

How do you decide what compliance tech to buy?

First, Mont says, a company must identify which functions can be improved and made more efficient with technology. Then, management must be brought online – this means getting buy-in from directors and executives and a worthy pitch that brings them to “yes” without promising the moon and stars. Then…the work begins.

Step 1: Identify solutions that meet your needs

What you need depends on what you are doing. Financial institutions, of course, have regulators circling the building every day and must submit enormous quantities of information. So, a likely first pass would include running an initial in-house review of manual processes and identifying problem areas that would benefit from a tech upgrade. Then, build a business case for it. In many cases, the biggest difference in the adoption of technology has been the basic move from paper to automation technology.

 Step 2: Put software vendors through their paces

Have some sort of “change the organization budget” so you can afford to look into research and development and scan for new technologies that could potentially be disruptors or great enhancers of what you are doing now. In particular, for financial services companies, systems that help collect, organize, and deliver large amounts of risk data to federal regulators. These often are stored in legacy systems that are internally siloed and make it difficult for regulators to manage this data for their surveillance efforts.

Third-party vendor onboarding should be documented, easily and transparently. Managing “smart contracts” means the compliance and audit functions can monitor transactions in real-time. Internal auditors will have a more efficient way to identify potential fraud and investigate a series of transactions using rules-based surveillance techniques.

As an example, Mont wrote that a firm might have a rule and policy that paying for a gift of $500 or more for a government official needs to be approved by a supervisor. An entry that doesn’t follow the rule could generate an immediate notification to compliance. However, most often, the decision of which system to select comes down to money.

Step 3: Get buy-in and resources internally

Getting buy-in so that management will allocate the money for a tech expenditure may require the CCO or a parallel technology position to convince directors and executives of a value proposition. Assessing ROI can be a difficult and very company-specific process, but common proof points would likely include cost overlay versus the monetary savings of risk reduction, regulatory enforcement avoidance, compliance-related cost savings, increased employee productivity, and streamlined business-side operations.

 Step 4: Play in the sandbox

Assess whether the new technology will integrate with your legacy systems company-wide. And then, invest in training. Consider starting an incremental roll-out to test-drive your technologies to see if they are doing what you need them to do. Don’t try to change everything at once, Mont’s article advises. Take bite-sized chunks and do things over time.

Step 5: Find the right people for the right jobs

If the goal is measurably improving compliance functions, a company might need to review hiring and training procedures. Technology can deliver opportunities to automate highly manual processes, which can raise the spectre of a department-wide issue – many compliance professionals may not have a tech background. Your compliance teams may know policies and they know controls, but going forward tech-savviness is critical.

Mont concludes that the key to a successful technology adoption is rooted in how the company operates as a whole. Being mindful of both internal and external functions when adopting new technologies, he says, will go a long way in driving an efficient and effective implementation that puts the company on the path toward exciting, job-improving innovations.

That’s where Patrina comes in. We’ve built our business based on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, records archiving, and designated third-party services specifically designed for the financial services community. Be smart. Be covered.