Regulatory Technology (RegTech) — often slated as the growing sister of FinTech — is the application of technology to improve the way we manage regulatory compliance.

The kinds of technologies these companies use may span the gamut, including machine learning, natural language processing, blockchain, and AI.

RegTech companies are able to choose their industry much the way a consultant chooses a specialization, or a student chooses an academic major. For example, Ascent has — for now — chosen to focus on financial services regulation. Other heavily regulated industries that could benefit from regulatory technology include industrial, energy and utilities, healthcare, pharmaceuticals, consumer products, and communications.

Though there is no formal classification of the kinds of RegTech companies that exist (yet), common ones include:

  • Data management solutions
  • KYC (Know Your Customer) solutions
  • Risk management solutions
  • Records management solutions
  • Solutions that help companies manage a specific regulation (like GDPR)
  • Change management solutions

The state of the industry

The response from legislators and regulators to the 2008 financial crisis was to try and prevent damage that had already been done. The regulatory pendulum swung to extremes of over-regulation with Dodd-Frank, inflicting enormous costs to businesses as firms hired lawyers, accountants, and consultants to try and keep up. The massive toll regulators exacted on businesses was and is staggering.

Since 2008, U.S. banks have been fined a crushing $243 billion. The cost of complying with voluminous, complex, and ever-changing regulations across multiple regulators and jurisdictions effectively amounts to an 8% tax on every firm doing business in the financial space.

Expanding a business into new regions and products also carries enormous challenges and risks, as market participants must get up to speed on unfamiliar regulatory schemas, usually by hiring still more professional advisors. At large financial institutions, the cost of managing legal and regulatory risk averages $10,000 per employee. For major banks, for example, managing the compliance challenges of MRAs and MOUs can cost upwards of $1 million apiece.

READ ARTICLE: How Ascent Helps Customers Save Money on Compliance


Why is the world ripe for a RegTech revolution?


We write laws with computers, but follow them with post-it notes and excel sheets. This juxtaposition is unsustainable.

Simply put, existing service offerings are too expensive, and the cost of compliance is increasing dramatically. The velocity of regulation is increasing (a regulatory update goes into effect every 7 minutes!), and financial firms are regulated by multiple different organizations, across jurisdictions, and administrative and regulatory law is continually increasing.

Let’s look at a brief case study in Europe.

Europe has operated in a quasi-federalist state since the implementation of the European Union. Inter-jurisdictional issues and cross-border disputes abound; it is no mistake that RegTech has taken off in the face of such complexity. Using regulatory technology and governance, risk and compliance (GRC) platforms to follow and comply with the tangled web of rules is increasingly necessary to ensure the crossing of t’s and dotting of I’s.

This can be likened to the development of roadways in any major city. Transportation is easy to coordinate and plan in the early days, but following two hundred years of growth and infrastructure development — even a single new road can have extraordinary consequences on traffic patterns, and citizen behavior. Regulatory changes and the imposition of new rules are much the same.

Not all heroes wear capes…

What stands between today’s financial firms and the disaster of a compliance failure? Until recently, only the valiant toils of often unheralded Compliance professionals. Daily, these Compliance, Audit, and Risk professionals defend their firms against new and unpredictable threats — sometimes putting their own livelihoods and reputations on the line.

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Their vigilance prevents a regulatory action from crushing a firm’s stock price and slashing its market cap, safeguarding the firm’s reputation in the eyes of both watchdogs and customers.

Compliance teams truly become a force to be reckoned with when they team up with the formidable power of RegTech.

Compliance teams truly become a force to be reckoned with when they team up with the formidable power of RegTech, which as we mentioned before may include AI, natural language processing, and other emergent technologies.

What makes them so powerful? Simply put, regulation technology solutions like those developed by Ascent boost your compliance team to previously unimaginable heights. Toilsome tasks like summarizing and parsing regulations that might take thousands of human hours now take just minutes. Instead of burning through time, money, and resources on tedious minutiae, RegTech frees up Compliance professionals to spend their time on critical tasks, like handling exceptions and high-risk compliance issues, and advancing the firm’s growth and operations.

READ ARTICLE: How Ascent Simplifies Regulatory Change Management with Automation


Why it matters

Protecting your business and managing your risk is more important than ever. Investing in RegTech solutions will have extraordinary payouts  in data completeness, efficiencies gained, and overall safety from the consequences of non-compliance.

The global investment in regulatory technology continues to grow, and the implementation of technology solutions will be the norm for every financial services firm in the coming decade. For most firms, being left behind on this count is simply not an option. 

Furthermore — historically, the world has viewed spurring business (under-regulation) and protecting consumers (overregulation) as diametrically opposed.

With RegTech, we are helping to create a world where it’s easier for businesses to comply, unlocking both opportunity and wealth without compromising consumer protection. And that makes a better world, for everyone.

The Ascent story

In 2008, Ascent Co-Founder and CEO Brian Clark was working as a capital markets regulator. By that time, he’d already gained extensive experience in regulatory compliance through his work with derivatives exchanges, market investigations, clearinghouse compliance, and registered brokerage businesses, among others.

When the global financial meltdown occurred, Brian had a front row seat, witnessing firsthand how under-regulation spurred risk taking and lax compliance practices that helped inflate the bubble in real estate assets and derivatives; then, he saw the over-correction with Dodd-Frank, drowning businesses in complex regulation. It was clear something needed to be done. Thus, Ascent was born.

Ascent’s RegulationAI™ allows us to automate the most tedious and error-prone parts of compliance. Based on your firm’s unique profile, Ascent automatically delivers the obligations and rule changes that are relevant to your business, cutting out significant white noise so that you can focus on a much narrower set of obligations. Ascent is faster and more comprehensive than humans alone, saving Risk and Compliance Officers hundreds of hours of manually researching, reading, and analyzing regulation. This targeted regulatory knowledge can be accessed directly within Ascent’s cloud-based platform or via API. Ascent also provides a powerful suite of obligations management tools and capabilities, helping customers achieve a fully traceable, end-to-end compliance program. 

READ ARTICLE: Building Regulation AI: Solving Compliance in the Age of Artificial Intelligence


The result?

Massive amounts of time saved in trawling regulator websites and manually identifying your obligations, as well as reduced employee training time. Firms are able to better control their compliance costs, as well as avoid penalties and fines.

Thanks to the efficiencies gained and newly liberated resources, Risk and Compliance can direct their attention to more critical tasks — thus drastically increasing their effectiveness at anticipating and mitigating risk, and protecting the firm’s reputation.

Today, the Ascent team is comprised of a passionate group of technologists, compliance officers, data scientists, and lawyers, committed to helping financial firms and Compliance teams around the world win at regulatory compliance.

Ascent serves all types of financial services firms, including Banks, Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Registered Investment Advisors (RIAs), Broker-Dealers (BDs), Futures Commission Merchants (FCMs), asset and wealth managers, and others.


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