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Virtual Chat | Behind All Good Decisions: How Risk and Compliance Can Use Data Smarter

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We live in an age of big data — a fact that, for many companies, is as much of a boon as it is a challenge. For this fireside chat as part of our Virtual Open House, Annie Eser, Account Executive, walks us through “Behind All Good Decisions: How Risk and Compliance Can Use Data Smarter.”

Check out the full talk above and be sure to visit our Open House page for more great conversations!

LEARN MORE: Ascent’s Open House: Socially Distant, Virtually Connected


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Virtual Chat | The Evolution of Regulation

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As part of our Virtual Open House, Maria Phillips, Implementation, discusses “The Evolution of Regulation” across market cycles — including our recent long bull market as well as the looming bear one.

Check out the full talk above and be sure to visit our Open House page for more great conversations!

LEARN MORE: Ascent’s Open House: Socially Distant, Virtually Connected


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Virtual Chat | Thinking Machines: Why Ethical AI Matters in Tumultuous Times

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To kick off our Open House, we had Ascent Founder & CEO Brian Clark discuss “Thinking Machines: Why Ethical AI Matters in Tumultuous Times.” Check out the full talk above and be sure to visit our Open House page for more great conversations!

LEARN MORE: Ascent’s Open House: Socially Distant, Virtually Connected


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Digital Disruption: Two Big Shocks to the Industry and What They Mean for Compliance

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Managing regulatory risk may be business as usual, but the stakes continue to rise.

Few things ramp up pressure on compliance officers more than industry “shocks” — high-volume, high-impact dislocations in the marketplace that render existing regulation inadequate (at best) and cause both regulators and businesses to scramble to put new controls in place.

In this article, we discuss two emerging shocks to the financial industry and how they impact compliance.

Shock #1: The Tech-Fueled Great Acceleration

Technology is at the root of virtually every recent shock to the financial industry affecting compliance.

For awhile, incumbents saw tech as a band-aid for legacy problems and inefficiencies. Now, however, technology is viewed as the necessary bedrock of the industry.

This mindset drives the financial industry toward a Great Acceleration: faster, more efficient interactions with clients and counterparties, faster flow of capital between institutions and across borders, and faster execution of trades and strategies.

Regulators and Firms Struggle to Keep Pace

For compliance departments, the Great Acceleration poses a huge risk.

The fact that regulators (and even many market participants) are still coming to grips with new technologies and products – e.g., AI, blockchain, cryptocurrencies, data privacy, and cybersecurity – will not slow the pace of innovation.

Existing regulations will increasingly fail to respond to market conditions, making compliance difficult by virtue of a frequent disconnect between market rules and practices.

What’s more, as markets continue to innovate much faster than regulators can respond, new regulations will grow obsolete faster and faster.

One area in which the Great Acceleration has caused particular pain for compliance officers is the realm of “know your customer” (KYC) and other anti-money laundering (AML) compliance obligations. Investigative and reporting obligations have turned compliance departments into what amount to private law enforcement operations.

Already, firms face substantial fines for working in embargoed or sanctioned jurisdictions. As the volume and speed of trades and capital flows increase, these compliance and investigative obligations will continue to trend toward greater complexity and risk.

RegTech Boosts Compliance Speed and Efficiency

RegTech solutions can help relieve the shock of the Great Acceleration by doing in minutes what would take humans hundreds of hours.

For example, AI-driven technology can help regulators understand their impact across regions more quickly, making rule-making potentially more efficient and effective.

Similarly, RegTech has a massive role to play in helping financial firms pick through  increasingly detailed and onerous regulations that often (albeit unintentionally) suppress value-creation to a far greater extent than they deter wrongdoing.

Emerging solutions will help firms automate KYC data collection, monitor capital flows and trading patterns, and report suspicious behavior to regulators and prosecutors.

Shock #2: The Shift to an All-Digital Environment

Another significant shock we’re experiencing in the financial world involves the tidal-wave shift in consumer demand toward a “digitally native” investing and financial management experience.

The FinTech boom has begun to transform entire business models by catering to that demand. Businesses have a choice to either stagnate or adapt to meet the needs and changing expectations of new customers.

No Market Niche Left Untouched

It’s difficult to overstate the breadth of change the demand for a fully-digital experience will continue to bring to the marketplace.

As it has in so many other industries affected by the digital revolution, the shift to an entirely digital mode of accessing and consuming financial products and services will require firms to innovate and re-create physical goods and services in the digital realm.

The shift has already spurred entirely new business sectors in banking (e.g., challenger “virtual” banks), money (crytpo, obviously), and payments (which grew so large, so fast, it already feels like a mature business model by today’s standards).

With the exception of the early “e-banks,” none of these businesses existed at the turn of the century, and many weren’t even around at the beginning of the 2010s.

RegTech Leverages AI to Reshape Compliance Roles

For every market sector and asset class affected, the rate and pace of regulatory changes and downstream compliance efforts will also increase, putting pressure on compliance departments to keep up.

That won’t be easy.

Firms will face difficulty following, tracking, and complying with all the new rules and regulations that emerge. The sort of over-regulation typical of an industry in transition seems inevitable, as does the risk of harsh penalties for non-compliance.

The only way to stay ahead of the frequency and growing complexity of regulatory change, and to protect firms from feeling the wrath of regulators, will be to shift much of the work traditionally done by humans onto machines.

The function of human compliance staff must change from rote collection and manual sifting of data to higher-level review and analysis of machine-generated reports.

AI and natural language processing will take over the heavy lifting of analyzing regulatory text, freeing up compliance officers to concentrate their efforts on relationship-building and overseeing the safety of the firm from the perspective of strategic decision-making.

The Role of the Compliance Officer is Rapidly Evolving — Are You?

By Blog

The role of the compliance officer is rapidly evolving — are you? We teamed up with financial services consulting firm Catalyst to explore this topic. 

Commercial partner Blythe Barber, having worked formerly at JWG, Capco, Schneider Trading Associates, and Expand Research (a Boston Consulting Group subsidiary), brings years of practical knowledge and industry experience to our discussion.

1. What have been the major shifts in compliance jobs over the past 5, 10, or 20 years?

We’ve seen fundamental shifts.  The CCO’s skillset has had to increase in tandem with the volume and complexity of regulation.

Regulation has become a ‘show me’ culture, requiring compliance to use more sophisticated tools to enhance their monitoring oversight, including automated exception handling methods.  

More sophisticated compliance functions now focus on fewer, but more senior staff, who will often have worked in the business and across other parts of the firm and industry. Systems, not people, are now the compliance guardians.

Across the industry, compliance has expanded over the years to significant headcount, with multiple processes and workflows coming at a huge price: a legacy of panic hiring to satisfy massive regulatory regimes.

Now, the costs of carrying a large compliance function are beginning to bite.

Now, the costs of carrying a large compliance function are beginning to bite. In addition, compliance is now much more involved in the design of products to ensure regulatory checkpoints are built into the design of automated data tools.

And the next big shift is already happening: technology innovation, combined with regulators’ growing appetite for sandbox and RegTech vendors to automate the rule books.

Couple that with the rise of sophisticated natural language processing and artificial intelligence and it’s a very different world from even five years ago.

2. What new skills must compliance professionals have in 2019 and beyond?

The main competencies needed now are technical and communication skills, coupled with the cultural dexterity to be successful agents of change. 

Compliance is not for the fainthearted – it’s a multi-dimensional challenge.

Where once compliance staff operated like lawyers, now they need to be techies, with a deep understanding of the technology estate – even to the level of core code – and a firm grip on the whole reporting process from ‘natural language’ to control frameworks. 

They also need to be diplomats, facing-off to diverse stakeholders from regulators to colleagues to technology leads.

And, they’re indirect revenue generators.

The front office has been fighting a perfect storm for years, with margins squeezed by low interest rates while regulation causes capital costs to rise.

The drive to reduce costs via automation and standardization feeds into the bottom line of the bank’s revenues.

And then there’s the complex topic of culture changeCompliance is not for the fainthearted – it’s a multi-dimensional challenge.

3. Has the perception of the compliance function shifted, especially in the C-suite?

Compliance firmly have a seat at the table — high cost and senior roles. With SMR and other Regs, senior figures need excellent compliance people, and they need them on their side!

Compliance should no longer be seen as the ‘back office police’ playing second fiddle to front office profit-makers. There’s now a seat at the table and a chance to lead the agenda. 

But equally, many specialists operating at C level spent their careers in a very different world on the way up. Now they’re there, the rules have changed.

Today’s CCO needs to be tech savvy and people-, culture- and change-oriented. 

The competition for clients, the pressure on margins, and the war for talent all mean CCOs must enable the whole firm to understand ‘why’ — not just ‘what’ or ‘how’. 

Compliance needs to be chief cheerleader for the fact that doing the right thing isn’t just a mandatory exercise to avoid punishment, but an active enabler of good business

All too often, the stumbling block is knowing what ‘good’ looks like, proving why it matters and making a compelling case for what it can achieve.

To tackle this, Catalyst developed a High-Performance Behaviours Model with six key metrics. This ensures firms can implement a measurable way to harness hearts and minds for clear business benefit and move compliance from a necessary evil to a valued – and valuable – business partner.

4. What’s next for the compliance officer?

The challenge now is to mind that gap between current and future state and ensure compliance has the tools and techniques to close it.

As the estate becomes more modular, compliance roles must evolve to high levels of engagement with regulators, clients, tech vendors, outsourcers and internal stakeholders.

Tech savviness will be key to deal with new platforms and new ways of working that enable — rather than eradicate — the human dimension.

It’s seriously not a great use of anyone’s career to fill in spreadsheets and undertake manual tasks at high cost.

As for a prediction?  

It’s already here: regulators publishing “up to the minute” automated rule books that can be consumed in code and pushed through the organization, automatically updating the numerous artifacts and records necessary to prove compliance or be investigated by a regulator or data inspection.

That’s perfectly possible, but one heck of a contrast to the all-too typical scenario of time-consuming, labour intense and costly reconstruction, legacy systems, poor data and lack of accountability.

The challenge now is to mind that gap between current and future state and ensure compliance has the tools and techniques to close it, building and buying where appropriate for a firm’s estate – and of course picking the correct partners with which to do so.