Hello everyone, my name is Michael Kehio.
Let's continue our discussion on part F of module five,
by looking at section 5.27,
which is keeping up with regulations.
Now, we'll start off with a quiz,
and this is the quiz,
it's around keeping up with regulations.
Which of the following should be considered
when considering a RegTech solution.
So you want to utilise a RegTech solution.
What are the things to consider,
which are the key things here
that have been mentioned in your study guide
as required or needed to be considered?
So the correct answer there
is type and quality of data needed,
as well as the agility of the solution.
So you need to be asking yourself
what type of data is required,
to make sure that you match that solution
to the organisation.
The agility of that solution is very, very important,
that it can be changed very quickly
to adapt to any changes in regulation,
and it can quickly be able to provide the necessary reports.
And so these are the key things that you need to consider
when you are looking at RegTech solutions.
So data is important, agility,
and maybe I'll mention about maturity.
So just making sure that
if you're dealing with a RegTech provider,
but they have been in the industry for quite a bit,
they really do understand your requirements and the like.
And so those are some of the key requirements
that you need to consider.
Now, this is AUSTRAC's expectation of RegTech.
And so you will see here with,
what they have said is,
regulatory technology businesses, RegTechs,
can play a significant role.
And this is the beauty,
you'll find that regulators in Australia
are actually very open to RegTech technologies,
they're very open to work together
with RegTech providers and the like.
And so one of the key things in this page here is,
regulatory technology businesses can play a significant role
in helping the financial industry
meet it's anti money laundering
and counter terrorism financing obligations.
Now, I shared several articles with you and reports
showing that managing those money laundering,
and counter-terrorism obligations
are actually applied by banks.
We saw that in Europe,
that that is actually the key proportion
of how financial institutions in Europe
are applying RegTech.
So, what is AUSTRAC's requirement when it comes to this.
These organisations, to ensure your solution
meets AUSTRAC's expectations,
you should demonstrate an understanding
of the Australian AML/CTF framework.
So that's very, very important,
that that RegTech technology,
is actually tailored to the Australian environment,
and captures holistically
the requirements under AML/CTF framework.
The second thing here is
understand the products and services
provided by clients, as well as the money laundering,
and/or counter-terrorism financing risks
and operational challenges that they face.
So you can see,
it's not wise to use a RegTech provider, as an example,
who is very new to the market,
or probably has never operated in Australia,
but has operated out there,
because they may not really fully understand
the requirements within the country.
The other thing is understand the gaps a client may have
in meeting their regulatory obligations
and potential RegTech solutions.
So it's very, very important
when you are implementing RegTech technologies,
or when you want to use a provider,
that you first understand,
what is your organisations,
where are the gaps sitting?
Is it that you're using too many manual processes,
and you're missing particular compliance obligations?
What type of compliance obligations are being missed?
And obviously it's also very important
to first have identified the compliance risks
that the organisation faces.
Be able to clearly explain the solution to your client,
ensure your client understands these obligations,
ensure your solution, if originally developed
for a jurisdiction other than Australia,
meets the Australian requirements.
And you will find that this is actually very relevant
because out there you will find that
RegTech has really evolved, especially in the US,
but you will find that these players
are obviously wanting to have a global footprint.
And so they are advancing and entering new markets.
And so it's very, very important
to make sure that those obligations
or those RegTech technologies
have been tailored to the Australian environment.
So let's now look at section 5.28,
which is Preparing for RegTech.
There are several strategies you can apply here,
assume you are the risk professional,
you have been given this responsibility
by your financial institution.
Now, the first one there is,
you can either choose to build from scratch,
and here it means that you have,
ideally you should have very technical IT,
and a very technical IT team that can be able to do this,
and also you have the funds, you have the resources
to be able to do this,
because this is a lot of work, it's going to cost a lot.
The other thing that is required therefore here as well,
is to make sure that you have a compliance team
that can work together
with the team that is creating or developing this product
to ensure that those compliance obligations are met.
So, a very, very challenging task,
but if the organisation can afford it and it has that,
then it will do that.
The other one is to buy a product off the shelf,
but then have your team within the organisation support it.
So that is also possible where you can buy a software,
but have your team support it,
and then you can tweak that software
to meet the organisation's needs.
Financial institutions are also partnering,
and this is especially with traditional banks and the like.
They are actually partnering with other institutions
that have experience with regulatory compliance.
So this can also happen until a time comes
when the financial institution or the traditional bank
now has the competency to do it,
it has upskilled its people, and the like.
So that is also an option.
The last option here, and it's very well applies,
is have this as a managed service.
And what you'll find is that,
it's really using a software to manage this.
And so this could be by using a RegTech provider,
and applying their software in your organisation.
And so this is a cheaper way of doing it.
And the beauty with this is,
it's not really your responsibility
to keep changing this softwares.
So you might find that the provider of this software
will be able to keep those changes updated.
As the regulatory requirements change,
then the software is also updated.
So you will find there are all these different strategies
that you can use to implement RegTech
in your business or in your organisation.
Now, there's also this term, risk as a service.
Now, remember we looked at software as a service.
So we have risk as a service.
This is a term coined by, mostly it's IT.
And here I have JP Morgan offering this as a service.
This is around trading, so securities trading.
And you can see here they are saying
they are using these type of technologies,
quantitative analytics, derived market data,
and real-time risk management technologies
to help you manage these.
And they're saying, risk as a service provides access
to their quantitative models and market data,
helping you make risk-informed decisions
and trade with confidence.
So it's also powered by analytics and technologies
used by our market leading trading desks.
And these are some of the areas it looks at
or that are contained within it.
So it can assess market data, quantitative models,
and instrumental coverage, as well as connectivity.
So remember, when we were looking at Deloitte,
you could see that risk management was a key area
that RegTech technologies also look at.
So this is one such area.
So this is what JP Morgan is doing, risk as a service.
So let's look at section 5.29.
What is next for RegTech?
Now, obviously RegTech technologies are very new,
RegTech providers are very new,
especially in the Australian market.
And so, because they are not well known,
they need to win the trust,
and this is one of the issues
that is currently in Australia and in many markets,
gain the trust,
they need to gain the trust of risk professionals.
So that is one.
The other one is to gain that regulatory support.
And this is very, very important
for them to really become viable and mature.
Now, ASIC has obviously acknowledged
that RegTech has gotten
to a place where we have viable products.
But there's also a great need to continue investing in them
so that they can mature and be embraced within Australia.
So those are the two key areas
that are currently taking place in Australia.
Those are the two key things
that will influence the evolution of RegTech.
So what are the key issues?
These are the key questions that stakeholders are asking,
especially risk professionals.
What is the current and future delivery of RegTech?
So yep, they are doing a bit now,
they are able to manage
some compliance obligations here and there,
but what does the future look like?
Is this something that is sustainable as an example.
Is this a sustainable solution?
What is its scalability?
Can it be utilised into the future?
Should the organisation invest heavily in this,
and will it rely on it?
Because sometimes you might find
an organisation may invest in it,
but then realise that it's not really meeting the objective
that the business had in mind.
Confidence about the solution is also a key one.
And then the other one there is
stakeholder and regulatory support.
So it would be interesting to see over the next few years,
what the boards of all these companies think about RegTech.
Now, just to show you the uptake
of RegTech technologies across the world,
this is a report from the
Australian Government Productivity Commission,
and it's also a recent report.
So you can see here that in the US,
this is where there is the highest uptake,
followed by the UK,
and that's why we were looking
at the European Banking Authorities reports,
because we can learn a lot from these markets
where RegTech has really been taken up.
Canada, Singapore Islands, Switzerland.
So, you can see Australia is not on that list,
but we are coming up.
It's being accepted here in Australia,
and it's being utilised.
And so that is very important to see
that this is, it looks like
it's going to be a very sustainable market for RegTechs.
Now, what does the future look like?
Now, what you will see with businesses is,
especially businesses that are dealing with a lot of data,
is they're realising, hang on,
we can actually diversify our businesses
into different areas or sectors.
As an example, you will see here
that Apple is now working with Goldman Sachs.
They've entered into an agreement
to get into the buy now, pay later service.
And the reason is, first of all,
they have a lot of customers
that they already have in their portfolio.
They have quite a number of these technologies
that can support this eWallet,
for example Apple Pay, and the like.
And so, because they have all these data,
and they also have the funds, they have a lot of money
and so they have the ability to invest in this.
You'll actually find that after these news,
the shares of Afterpay and Affirm dropped at this news.
Why, because these are big players in the market.
And so, you will find that when these players come in,
and as this evolves,
as big data continues to become the medium of exchange,
it's practically impossible, very difficult,
to use manual processes alone or humans alone
to manage compliance obligations and regulatory reporting.
And so RegTechs now will play a bigger role in the future
when it comes to meeting compliance obligations.
So, that brings us to the end of part F,
which is on regulatory technologies.
And with this,
you can see the benefits of using RegTech technologies,
and where we are going to in the future.
Thank you.