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Compliance by Design

December 3, 2018

 

Global systemically important banks have diverse lines of businesses and they operate in multiple geographies. This exposes them to a complex and dynamic regulatory landscape. To meet with the regulatory expectations, they invest in multiple initiatives and their supporting technologies. Often these initiatives are isolated without having an association with one another and their underlying data. This results in redundancies as well as gaps in the overall compliance program. 

 

What if we could create one integrated compliance program across the bank and geographies? What if this program could use one application to integrate all the discrete initiatives? It would give an end to end view of the compliance program with interconnected data and artefacts. It would enhance traceability, simplicity, thoughtful control and of course efficiency.

 

At SEEM we have designed an application like that. It integrates and automates all aspects of the compliance program that is used for all day to day activities. It results with the bank 

  • having a single source of its regulatory obligations mapped with applicable lines of businesses, controls, risks and other data elements

  • able to manage regulatory changes through a structured change management process

  • having an effective and efficient policy and document management system

  • executing compliance advisory activities through a case management structured process

  • having an integrated risk management with a framework that supports business in real time, also leveraging machine learning for credit risk decisions

  • executing control tests & managing issues in an integrated and streamlined manner

  • leveraging machine learning in Anti Money Laundering space

  • producing regulatory reports backed with data and insights as expected by the regulators in an agile manner

An integrated compliance data universe helps remove redundancies as well as any gaps in the program. It enables clear roles & responsibilities for maintenance of regulations and their implementations. With regulations changing at a rapid pace it allows their capturing accurately, raise change requests mapping to each of the changes and follow a process that facilitates their categorisation and prioritisation. The change process further leads to impact analysis of the regulation, identifies gaps and change activities needed like updates in policies or other controls, creates a change implementation plan, allows coordination and collaboration for execution of tasks through the system including their approval. It facilitates appropriate stakeholders engagement early on in the change process, making it more effective and meaningful. Regulatory change implementation thus becomes organised and intelligently guided by the system.

 

The changes in policy require multiple tasks like development, review, approval, communication and attestation. Each of these tasks involves multiple people. Standardised workflows based on the type of policy helps make the process more effective, increases collaboration, ease in seeking approval, managing communications and increases the overall quality of the final policy document.

 

In banks, compliance professionals end up spending a lot of time in advisory activities.  Businesses struggle to have effective & timely advice to enable them to act concisely. To address this challenge we have put in place a structured case management process. Lines of businesses will raise requests with adequate details that allow their classification into different priorities, service levels, assignment to right SMEs etc. The advice provided by the compliance professionals becomes part of a trackable database. Any future issue and action based on the advice are also trackable. This auditable repository of advice becomes very useful in improving the quality and efficiency of the advisory tasks and for future improvements in the process.

 

We see regulatory compliance as an embedded activity in the day to day work. Thus risk management is integrated on the same platform. Risks originating from regulatory expectations are already mapped with respective regulations, controls and other data elements. The risk framework enables businesses making decisions while taking into consideration applicable risks and their quantification and predictions using models that have the possibility of leveraging on Artificial Intelligence and Machine Learning also. The risk management framework thus enables people to identify and monitor developments in real time to provide the right level of attention and timely action needed to contain the risk. 

 

Monitoring and testing of controls are key for their ongoing assessment and evaluation of the status of regulatory compliance in the bank. Further managing the issues thus found and their timely remediation with effectiveness is essential for ongoing maintenance. This integrated platform, having a complete map of regulations, applicable lines of businesses, controls, risks and all other data elements enables development of a comprehensive plan for control monitoring and testing by all three lines of defence - first line, second line and the audit team. There are capabilities in the system that facilitates analytics led monitoring and testing. Big data, artificial intelligence and machine learning have added new dimensions to this space. Read more on Intelligence-led fight against financial crime. The issues found will be logged centrally and assigned entities will be able to update appropriate actions for remediation. Thus it will simplify monitoring and closure of the issues. The system will enhance cross-functional coordination and collaboration making this integrated process of issue management highly effective and efficient. 

 

As we all know there is a constant rise in the regulatory scrutiny on banks. With regulators gaining more capabilities to analyse data using technology they are striving to ensure compliance in a more transparent and auditable way. Unlike in the past where banks submitted static reports at a specific time in the right format, regulators are now looking for more detailed and granular data for better insights. They are not satisfied with the right conclusion made by the bank and reported to them but are looking for explanations that led to the conclusions as well. This need for detailed reports backed with data demonstrating how the conclusions noted in the report were made through the underlying data will be easily fulfilled by this integrated system. Reports can be generated automatically from the data available in this integrated platform. These automated reports will have high accuracy with acceptable data quality as well as an auditable trail for the conclusions made. The agility in the system will allow for changes in the expectations at a phenomenal pace and accuracy. Furthermore, execution of regulatory engagements will be simplified and efficient with a centralised execution of the plan. It will have identified tasks & sub-tasks, assigned roles and responsibilities, easy tracking of progress and many more aspects needed in a regulatory engagement. 

 

The success of the implementation of such a solution will highly depend on the way this change is executed. The program will touch a large population in the bank. It will require participation and a lot of experimentation by the people who will be affected. At SEEM we design change through movement not mandate. We help the bank discover a purpose beyond just making a profit. We let people see their aspirations towards this purpose and find areas of work within their scope and possible influence where they can bring change that will help them contribute towards this bigger purpose. We share the benefits and possibilities that are available for solving those problems and improvements by leveraging technology. The inbuilt agility in the system and its easy features to enable designing new solutions makes it an attractive proposition for people to try. We further create conditions and bring in design thinking to enable them to experiment and find solutions that will help them bring their pieces together on this platform. We spread stories from experimenting teams and mobilise people to join and take initiatives to bring changes they aspire for and deliver towards the bigger purpose. Technology is seen as an enabler in solving their problems and not a competitor to their jobs. Digital transformation thus becomes beautiful! 

 

 

 

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