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Tackle it with technology
For those reading this and wondering whether their own regimes would stand up to scrutiny, the good news is that technology is available today to auto- mate the processes required, while at the same time providing an electron- ic audit trail that can be evidenced to regulators. The old maxim that every challenge can be viewed as an opportunity has never been truer. Regulation-driven IT spend shouldn’t be looked at as a necessary evil, but instead seen for what it is: an extremely cost-effective means by which wealth management companies can ensure they are 100 per cent compliant, while at the same time lowering costs and improving service by allowing client-fac- ing staff to focus more on managing
relationships. Technology has been in use for many years in other sectors, such as finance and banking, where it has become a tried and tested compliance solution. Platforms can be obtained off-the-shelf and be up and running within days. LendingMetrics’ ADP (Auto Decision Platform) utilises Open Banking to help interrogate current accounts to deter- mine client suitability, in real-time. It also calls credit bureau and ID / AML data to cross check and establish a KYC threshold, and, because the whole process is automated, a screening can be completed in seconds. Once a client has consented via their GDPR permission, onboarding search- es are run against multiple bureaus in sequence where necessary, with
checks re-routed to second and sub- sequent bureaus should a profile fail at any stage. The ‘waterfall’ handling of checks maximises the chances of suc- cessful screening. Alongside credit bureaus, other third parties are used to ensure compliance in other required areas, such as AML, CTF and ABC. For managers deemed responsible under the SMCR, such technology pro- vides the peace of mind that comes with knowing you have digital systems in place that will stand up to the most challenging regulator scrutiny. Additionally, it has the potential to free-up the 40% of their time that most currently find necessary to allocate to compliance.
Director David Wylie says that automated platforms need to be used more extensively by the wealth management sector if it is to fully comply with the growing volume of regulation. A recent report by fintech company JHC and Compeer looked into com- pliance and the wealth management sector, and came up with some inter- esting findings. The research found that 58% of senior wealth managers were having to spend almost half of their working day on compliance issues. The primary reason for having to allocate this amount of time was concern about record-keeping and being able to evidence everything from new client screening to the nature and content of every client interaction, as well as its impact on product suita-
bility. This concern has been amplified by the extent of regulation and its ever more onerous requirements. Thanks to legislative frameworks such as GDPR, MiFID ll, 5MLD and SMCR, a range of regulations are now at the top of wealth managers’ priorities. Anti-money laundering (AML), combat- ing the financing of terrorism (CTF) and anti-bribery policies are among these, with such controls being essential in promoting integrity in the industry. In addition, source of wealth (SOW) and know your customer (KYC) checks are proving evermore important practices, and becoming a significant drain on managers’ time. It is understandable that, according to the report, many senior managers feel unprepared for this regulatory onslaught, with one in four of their firms still having to handle checks manually,
and the remainder relying on a combi- nation of manpower and technology. "Many senior managers feel unprepared for this regulatory onslaught, with one in four of their firms still having to handle checks manually" You cannot blame them for feeling somewhat daunted. The FCA has made it clear that it wants to see more preci- sion and evidence of due process from the sector. Senior managers know that the potential risks of not having a suf- ficiently rigorous regime in place are now considerable. Slip-ups, if egregious enough, can result in an appearance in court for those deemed responsible under SMCR and a large fine.
20 | Metrics Monthly
Q2 | 2021
Metrics Monthly | 21
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