There are better ways of spending money than paying fines

Introduction

Recently, DX Compliance became a member of the Australian Regtech Association. The RegTech sector of Australia is the third largest in the world, powered by great talent and the Australian Government’s pro-innovation policies, prudent regulatory systems and commitment to championing capabilities globally, which is driving innovation, and the largest programme of its kind in the Asia-Pacific region. Over 10% of all RegTech companies are headquartered in Australia.

RegTech Association

The RegTech Association was founded in 2017 as a non-profit organisation to support the growth of the RegTech sector and to accelerate the RegTech adoption. The association brings together government, regulators, regulated entities, professional services and founder-led RegTech companies to collaborate and partner.

More than that, Australia’s RegTech ecosystem is a vibrant ecosystem supported by a dynamic mix of great people, incubators and accelerators. Australia’s rise at a fintech hub was recently covered in the Fintech Times.  Australia is a global leader in RegTech innovation, and is at the forefront of RegTech product development. With a large and quickly growing RegTech sector and pro-innovation policies, there is no better place to do business.

The Event

The first two sessions on 17-18th March 2021 discussed the Big Picture and the Regulation Innovation. The Event was fully virtual and was clearly global, the 4th annual Australian RegTech Association ecosystem event, where world leading speakers from regulate entities, policy makers, regulators, entrepreneurs & users came together.

On 25th March the final session was on Innovation:

• Disrupting financial crime using advanced analytics and machine learning.
• Procurement and barriers to innovation.
• Rules as Code.

Key Takeaways

Trends in Regulatory Innovation: Collaboration between the Regulators and the Industry is important across jurisdictions and it was a great discussion that mentioned the current issues for Regulators and the problems they are facing and the solutions that they can find in a trustworthy collaborative way.

Expertise and Education across the Industry. Especially the Tech expertise as well as cultural issues internal and external played focus for Melisander Waterford (General Manager, Regulatory Affairs at Australian Prudential Regulation Authority) and Mark Adams, who also touched on the need for educational processes, someone has to take you through the organisation (internal Sherpa!).

GFIN: Information share it is in its early days. Plenty of opportunities for more collaboration. Key blockers: Cultural blockers, Trust – Regulators need to trust each other. Better outcomes by collaborating. Practically that are sensitive and confidential, especially in data sharing and access to information.

RegTech Beyond

There is more than just regulated Financial Institutions: Energy and Communication can learn from Regtech and Financial Services too. Across these industries, there is a large interest in Regtech and its effect. Especially in the post covid world.

The Power of RegTech

Regulatory Technology provides gains in cost effective compliance and back office functions and transforms them into a competive advantage, changing fundamentally the structure and the supervision.

Why RegTech Matters

There is no Fintech without Regtech, it is not just a local game, but in contrast to FinTech, far easier to scale globally. It is important to learn about the Regtech ecosystem and the future opportunities Regtech will provide.

New Sectors driving RegTech Adoption

RegTech generates interest in regulated industries beyond financial services in Australia, including aerospace, health services, utilities and telecoms to name a few. This is what we at DX call the Regtechisation of industries.

The need to access to financial services also means that many non-regulated entities become de-facto regulated in the sense that this access often depends on their ability to detect and mitigate risk.

How to operationalize Regtech the right way.

Needs a good strategy in place, reducing endless demos of different providers. A clear understanding of your own problems internally at various levels, before attempting to find a solution.

Benefits of Tech

The expectations on technology from one generation to the next has changed. Millenials are the biggest workforce on the earth and as digital natives they have much higher expactations than digital immigrants.

Employee Retention

A big challenge for Financial Crime Compliance Teams and CEO’s. A high employee retention has a huge impact on productivity in compliance departments. Compliance teams are bound to experience negative stress and are concerned with job satisfaction within their team.

The Past

In the past big Australian banks have been heavily fined for AML failures. The Australian regulator (AUSTRAC), filed legal proceedings against Westpac and Commonwealth Bank. Austrac’s Investigation of Westpac did focus on its Transactions monitoring.

As Westpac did not detect transactions that have been part of a money laundering activity. Following the recent investigations it is not a surprise that AUSTRAC will also look closer into other financial service firms. In regard to the Fincen Files, the Fincen Files have shown that Australian institutions played a smaller role compared to other countries. Nevertheless some of the countries largest banks have been named.

The Future

Technology is not a buzzword. There are better ways to spend the money then paying fines.

In a post covid world we all focus on the Future. We have to ! The future of Regtech is bright. Regtech is becoming more strategic. In the past it was more like Risk and Legal Teams, as businesses adopt the Regtech it is going beyond the Risk and Compliance Teams. Regtech is about data and insights which help businesses to get more insights on customer behaviour to enable innovation. Regtech is not just about automating workflows.

The role of Regtech ecosystems is important to take the industry beyond just financial services into other industries. Employee retention and a compliance department that enables innovation in the backoffice are two reasons, leading to a great customer experience and boosting the customer acquisition of the organization are more examples of the benefits.

The right regtech technologies solution is crucial for profitability. As compliance workforces grow (especially but not necessary only in Fintechs) it is necessary to allow companies and their investors to keep and close eye on the cost of compliance as the company scales.