Regulation of financial services including fund managers has ramped up since the financial crisis. FATCA, UCITS IV and V, CSDR, MiFID II, AIFMD, Solvency II and Dodd-Frank were just some of the examples cited by panellists at FundForum Asia held in Hong Kong. What is more is that the experts are unsure when all of the rule-making will stop.
Firms have little option but to comply. A manager subject to regulatory investigation is usually one dealing with mass client withdrawals at the same time. “The cost of not complying with regulations is bigger than the cost of complying, particularly if we look at the fines paid for various breaches around LIBOR, FX and AML,” said Philippe El-Asmar - Founding Partner at Amareos.
The challenges around regulation have not been helped by the fact that many financial institutions, particularly in Asian markets, have made disappointing progress towards automating their businesses. But efforts are being made to introduce disruptive technology to help financial institutions manage the inundation of regulation.
Arisa Siong, Head of Innovation, Mavelstone Group, highlighted firms needed to digitise and automate their processes. “If firms automate, they will see the benefits and the technological revolution will become real. This will allow firms to reduce operational risks, and go paperless, which will help make their day to day tasks easier.”
The move towards disruptive technology could lead to wholesale changes in regulatory compliance. Talk of blockchain and its single source of truth could help managers ensure they collect all of the critical data points on clients demanded of by FATCA without having to pester them for information.
AI and robotics is making in-roads in repetitive back office processes and the number of mistakes being made by this technology is far lower relative to humans. While some of this technology is some time away, it could dramatically scale down the costs of regulatory compliance in the near future.