The regulatory hoops businesses must jump through are growing increasingly complex. So how can firms ensure that they remain compliant in 2021?
That was the topic discussed during a panel held during Sthlm Fintech Week and moderated by RegTech Analyst editor Eric Johansson.
With him were the experts Linda Hellström‚ founder of GRC Watch, and John Erik Setsaas, VP of identity and innovation at Signicat.
The conversation started by acknowledging how much more complex regulations have become over the past two decades.
Several new regulations have meant that not only can companies face massive fines and reputational damage if they fail to live up to lawmakers’ expectations, but also that their business leaders may face time in prison.
“It’s a very strong motivation, right? I mean, if your organisation [don’t] follow these regulations, you go to jail,” said Setsaas.
He argued that it is important for regulated organisations to recognise why these laws exist in the first place.
“We see these breaches and challenges and that increases the awareness of why we [need] the regulations,” Setsaas said, adding that the new rules are not put in place without a reason, that anti-money laundering legislation, for example has been introduced because “we want to fight terrorism and slavery.”
Over the years, more businesses have enlisted the services of RegTech vendors to cut through the increasing red tape.
Finding the right RegTech for each organisation is far from easy, with there being over 1,000 businesses in the industry worldwide.
That is why Hellström actively encourages businesses she is in contact with to try out a few different vendors’ solutions in order to find the right fit for them.
“When they test the solution, that’s [a] way of understanding how you can use [the] technology,” she said.
She also encouraged more collaboration between RegTech companies to help educate businesses about what they could do.
“I really think that it’s really up to us, the tech suppliers, to make it easier for them to select the right tool and make it easier to buy the tool,” Hellström said.
Setsaas agreed, adding that part of that education is also about making it clear that while technology can be a great aid, introducing new innovations won’t automatically make a business compliant.
“You need to adapt your organisation as well,” he said. “You can’t outsource regulations. [It] needs to be intrinsic to your organisation, you need to change procedures [and] improve procedures.”
Hellström nodded. “You can’t just buy technology and then suddenly you’re compliant,” she said. “I think, the more you use the technology as well, it will be more clear in your policies and procedures how you actually use the technology in practice.
“And you have to start somewhere and then improve for every year. So maybe you will utilise technology in a completely different way in five years time, because then the organisation [will have] a higher level of knowledge regarding how to use the technology.
“It’s really about not being afraid of testing new solutions, since many of us are really focused on a specific compliance challenge. So they will not be able to find one tech supplier who will make them compliant with all possible regulations. That’s more or less impossible.”
Looking ahead, they believed that Covid-19 has encouraged businesses to look at RegTech in a new light.
Hellström argued that instead of just creating new reports, financial services firms now actively look for new and smarter ways to be compliant and to minimise unnecessary work.
“We really need to use technology to solve the compliance challenges in a smart way,” she said
The pandemic has also brought the risk of fraud, hack attacks and financial crime to the forefront of people’s minds. Setsaas believed this encourages RegTech vendors to step up to help businesses limit the risk.
“We need to make simple solutions for people that they understand and protect them,” he said
If you want to find out more about where the Swedish ecosystem is going, make sure you swing by Sthlm Fintech Week on February 9 and 10. FinTech Global is a media partner of Sthlm Fintech Week.
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