Automation can achieve cost savings, faster processing time, better staff productivity and morale while easing compliance complexities here.

Since the global financial crisis regulatory expectations and obligations have increased for the financial services industry. According to a report by Deloitte, the cost of compliance has tipped over almost all discretionary funding available to firms globally.

In a recent Thomson Reuters survey of 400 compliance and risk professionals, around 20% of respondents had implemented one or more ‘RegTech’ (regulatory compliance technology) solutions, with the aim to address compliance challenges and deliver regulatory requirements more effectively and efficiently.

These solutions are also largely applied throughout regulatory processes such as Know-Your-Customer (KYC), fraud management, risk and compliance management, and anti-money laundering (AML). The application of automation is intended as a solution to manage time-consuming regulatory processes, thereby freeing up resources for compliance tasks that require human judgement.

RegTech in APAC

The impact of regulatory compliance has been particularly hard for those operating across the heavily fragmented Asian markets, as their businesses often come under supervision of different regulatory regimes, with each having their own set of rules and requirements.

With many capital markets firms setting up their Asia headquarters within the Asia Pacific region (APAC), decision-making on how to reduce cost and address the challenges long term often lies in this region. Financial institutions are increasingly turning to technology solutions to address the impacts these regulatory requirements have on their internal compliance workflows.

At the forefront of this transformation is robotic process automation (RPA), which refers to the strategic configuration of software agents that automate business processes. Although this technology has been well known within the community for some time, its financial services applications have only recently started to develop quite substantially in Asia.

RPA has become one of the key technologies in helping local financial institutions stay competitive in an increasingly digital and highly regulated world, predominantly by taking over the increasing number of rule-based and repetitive tasks, brought about by regulatory requirements.

Firms have begun to realize that by intelligently automating certain tasks, employees can be freed to focus on work that requires uniquely human capabilities such as creativity, strategic thinking, and cognitive abilities.

Easier compliance with RPA

In APAC, RPA adoption has significantly increased alongside the trend of capital markets firms looking to build their technological capabilities in-house, along with relying on external vendors for specialized expertise, in order to operate within the regulatory framework.

For example, firms that need to comply with the Foreign Account Tax Compliance Act, specifically in dealing with the collation of US Indicia necessary to determine the correct tax domicile, will find RPA to be vital. Across APAC, asset management firms have been using a combination of both in-house and external existing systems, together with RPA software, to develop a workflow that allows robots to undertake specific activities.

Using such automation, asset management firms have been able to digitize full workflows in their compliance units. RPA has been implemented to search through various internal banking and document management systems, and external, third-party services, to extract any information related to US Indicia and then collate them into client records. The automation also helps to monitor team emails and other messages to identify any new requests, then populate, prioritize and process these details so that compliance teams are up to date on their reporting.

In cases where the information is unavailable or inconsistent, RPA alerts the compliance team so they can handle the case manually.

Substantial compliance savings

Following the implementation of these workflows, asset management firms based in APAC have reported substantial cost savings associated with external consultants and extensive internal operational efficiencies.

Besides cost savings, other important benefits of RPA are accuracy and consistency, both of which are attributes critical for organizations looking to enhance their existing cybersecurity practices such as those pertaining to identity and access management (IAM) and Indicators of Compromise.

A 2017 Forrester study had found that organizations with the least IAM maturity average over 12 cybersecurity breaches a year: more than twice the number of breaches compared to those with the highest IAM maturity—and also sustain more than US$5 million more in financial damage.

Another use case that has applications across the APAC region demonstrates how RPA can achieve this. as once a process is established as an automated workflow, it is executed the same way each time with very low probability of errors. Here, RPA allows capital markets firms to establish various business rules, data validations, calculations that are strictly followed to the letter, with robots working around-the-clock to complete these assigned tasks in a consistent manner. 

With well-implemented automation, financial institutions can achieve significant cost savings, with headcounts redeployed to higher value-added activities, and significantly improved speed in processing requests: from four to 2.5 days for requests that could be partially automated, and 0.2 days for fully automated ones. Reported errors, another important benchmark, have also been reduced significantly from 15% of requests to less than 1%. As the regulatory landscape becomes more complex and sophisticated, the financial services industry can benefit from the effective implementation of RPA.