Holistic Compliance

Here are 5 important steps to achieving smarter compliance with financial regulation

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Holistic Compliance - Here are 5 ways to comply smarter

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Increased Complexity requires a Holistic Compliance Approach

Over the past two decades, the number of financial regulations that firms operating in the financial markets need to comply with have exponentially grown.

Holistic Compliance - Increased complexity requires a Holistic Compliance Approach

At the same time, the amount of information collected and used by financial firms has exploded, with different data sets spread across multiple platforms and systems. This has made financial compliance much more challenging because, at the heart of all regulatory obligations is the need to bring together, analyze and store vast amounts of data for record keeping, reporting, oversight, and control. 

As firms strive to achieve compliance, it is becoming increasingly clear that traditional ways of managing regulatory obligations – through manual processes, large teams, and an array of end-point solutions – are no longer sustainable. Compliance costs are at an all-time high, now one of the top budget items and as a result, firms are often prioritizing cost over capabilities when making decisions around compliance. However, the knock-on effect is increased risk and lowered control over the compliance process, with higher costs in the long term.

But, there is a better way - we call it Holistic Compliance. We believe that by adopting a holistic approach to compliance and following these 5 steps, financial firms can comply smarter and transform how they meet compliance objectives and beyond.

Holistic Compliance - Manage Multiple Compliance Obligations on one Platform - SteelEye

1. Manage Multiple Compliance Obligations on one Platform

To ensure maximum protection against regulatory risk, the different stages of your regulatory processes – detection through to resolution and the data used – should all be connected through holistic compliance.

You should never have to manually move data sets from one solution to another. For example, you should not have to extract data from an email surveillance solution into an investigation tool to act on a potential market manipulation incident or compliance breach. Yet for many compliance teams, this is how they operate during investigations, which is a significant roadblock to improving operational efficiency around identifying and investigating potential market abuse and compliance risks. 

Instead, you should be able to monitor, investigate, alert, and analyze all trading and communications activity on a single platform under a single lens.

This connected holistic compliance approach is possible when all of your data is located on one central platform. From that single, golden source, the data can be used for multiple purposes.

For smaller firms, this means your compliance team (or person) can carry out multiple compliance functions – such as trade, and communications surveillance obligations, best execution, and transaction cost analysis - all within one platform. 

For larger companies, where different compliance functions are carried out by different teams, this means data can be shared and the same underlying data methodology can be used. This ensures a consistent approach and results in cost efficiencies. It also offers the possibility of closer alignment not to mention the fact that multidimensional data provides the context needed for systems to significantly reduce false positives. 

Benefits of managing multiple compliance functions on one platform

Holistic Compliance - Manage Multiple Compliance Functions on one Platform

By unifying data on a single holistic compliance platform, with automated workflows, and end-to-end visibility into the compliance processes, you can reduce risks such as the potential for data errors and compliance process failures. Data governance is also improved, as all changes to the data can be tracked.

Do 

  • Bring your data together on a single, auditable holistic compliance platform to improve data governance and reduce risk.

  • Manage a range of your obligations in one place to enhance compliance control and bring down costs.

Don't

  • Rely on manual processes for your compliance – these are error-prone and leave you at risk of non-compliance.

  • Assume that the data you are using is accurate – use technology to reconcile and check quality and accuracy.

SteelEye Named #1 RegTech Solution in 2022

"We selected SteelEye because of the quality of their technology, the regulatory expertise demonstrated by their team and their willingness to support our tight implementation timelines.”

Keith Frimpong, Global Head of Operations Change, Schroders | Learn more >

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Holistic Compliance - Bring Together Multidimensional Data - SteelEye

2. Bring Together Multidimensional Data

To get holistic oversight and insightful context, you should be able to look across multiple data channels and overlay them on top of each other.

Yet, traditional case management solutions are not able to overlay multidimensional data sets to enable compliance teams to see the whole picture.

Instead, many compliance teams look at their firm’s data in isolated areas, using separate systems.

This provides a huge challenge when trying to pull together relevant information required for investigations and trade reconstructions. As a result, compliance teams can often feel they are on the back foot.

Holistic compliance, where you can overlay multiple data sources provides much needed insight and relevant context. For example, if you align trade data with global news, you will quickly be able to determine if say, a trade was made ahead of a significant share price sensitive announcement – indicating perhaps that the trader had insider information.

What are multidimensional data sets:

Structured data: Trades, orders, spreadsheets, market data, reference data, corporate actions data, and customer data held in a CRM system

Unstructured data: Communications such as emails, voice calls, SMS, WhatsApp messages, news reports, social media

Similarly, if a trader makes an abnormally large trade, looking at communications around the trade time stamp can help to flag unusual behavior or perhaps, the leakage of insider information. If there were suspicious conversations, this provides you with additional context, before having a conversation with the individual trader.

Holistic Compliance - Bring Together Multidimensional Data to Uncover Threats and Opportunities

Benefits of bringing together multidimensional data on a holistic compliance platform

Having all your data under a single lens provides not only the oversight needed to detect compliance breaches but also the context required to distinguish real risks from false positives. Essentially, holistic compliance can enable your compliance teams to act quickly on cases where there has been wrongdoing, and at the same time, clear up cases where there has been a genuine trading error.

Do

  • Identify the data you need to understand problematic activity and behaviors in the right context.

  • Bring structured and unstructured data sources together on a single holistic compliance platform.

Don't

  • Try to align this data manually. This can be error-prone and result in missing key signals of market abuse or misconduct.

  • Look at trading, communications and market data in isolation if you want to see trends and patterns emerging between them.

“Fidelity partnered with SteelEye to get access to a single holistic view of the investment decision-making lifecycle and execution in the markets. This was previously only achievable through multiple systems that didn't talk to each other and would have to be viewed over multiple screens. SteelEye helps Fidelity connect the dots.”

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Holistic Compliance - Invest in Futureproofed Technology - SteelEye

3. Invest in Futureproofed Technology

Compliance teams working with an array of end-point solutions find it challenging to keep up with regulatory change, technological innovations, and the evolving requirements of clients.

Take the requirements for communications capture for example. Regulations are clear – what is not monitored cannot be used. Consequently, many firms have banned the use of WhatsApp because their existing solutions cannot monitor it.

However, despite these efforts, it has not stopped traders from using WhatsApp when communicating with colleagues and clients, as we have seen with the recent news surrounding US banks which are facing $1bn in fines for not stopping the use of unauthorized messaging apps by staff.

Simply banning a type of technology is not sustainable. With increasing client demand for modern communications platforms, firms need to be able to quickly ingest and monitor new channels. And while it has historically been difficult to capture and monitor mobile communications like WhatsApp, iMessage, and SMS, it is now not only possible to do but relatively easy to set up through mobile communications capture technology.

The ecosystem for trading desks is in a constant state of evolution, driven by changes to regulations, technology, client demands, and other factors. Compliance platforms should be able to adjust to change.

To conform with today’s ways of working and future-proof for further technological advancements, you should have a holistic compliance solution with monitoring capabilities for a range of messaging and trading platforms, that has the ability to easily add in new data sources.

Holistic Compliance - Invest in Holistic Technology That Will Adjust With Your Firm and The Regulatory Landscape

Benefits of futureproofed compliance technology

A futureproofed holistic compliance solution that is up to date with emerging technologies and can easily bring new data channels into the surveillance and compliance processes. When a compliance platform is built around the data, it can adapt quickly – ingesting, indexing, and analyzing new data sources.

Do

  • Think strategically about how your compliance technology infrastructure can adapt to regulatory change.

  • Consider how compliance can support the needs of the business to communicate in the way clients want.

Don't

  • Prohibit employees from using communication channels if there is a way to monitor them.

  • Rely on end-point solutions that cannot adapt to regulatory change or ingest new data sources.

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Holistic-Compliance-Focus-on-Data-First-and-Automation-Second-steeleye (1)

4. Focus on Data First and Automation Second

If you do not have your data right, there is no point in investing in machine learning. When broken or imperfect manual processes are simply automated, significant data quality issues can result.

Holistic Compliance - Focus on Data First and Automation Second - SteelEye

Too often, automation within compliance means applying technology to a process that is already broken. Without sorting out your underlying data, any automation, machine learning, or other advanced technology you apply to that dataset will not improve your compliance, it will only speed it up.

Data management remains a top challenge for firms on their compliance journey, with longstanding data quality issues, as reported regularly by the regulator – who is becoming less and less forgiving. So, when considering automation – which is an appealing prospect to most firms – it is important to make sure that this project starts and ends with data.

To generate a high-quality outcome, any automation you apply to your compliance setup needs to first make sure you are accurately and efficiently ingesting all the data you need. It then needs to make sure the data is cleansed and indexed correctly and continues to check data quality on an ongoing basis. It should also be able to monitor any changes to the data – made by humans or machines – and ensure that those changes can be audited and “time traveled” (i.e., you can go back to any point in time to see what the data looked like).

Benefits of focusing on data first and automation second

Only when an automation program is based on data governance can you automate regulatory processes like oversight, alerting, and reporting. In a specific process, such as regulatory reporting, both automation and high-quality data are essential. Yet, this is an area where much of the financial services industry continues to struggle. Working with the right platform should deliver 99%+ accuracy on data quality.

Do

  • Consider existing underlying data issues when thinking about automating compliance processes.

  • Explore how compliance technology can support data governance.

Don't

  • Move quickly to automate without thinking through existing challenges.

  • Assume that all compliance platforms bake in data governance.

Holistic Compliance - Consider the Full Cost of Cost of Ownership - SteelEye

Consider the Full Cost of Ownership

Having a number of end-point solutions for compliance is expensive. There is the cost of purchasing and maintaining those solutions, particularly if they are on-premise. If the solutions are hosted in the cloud, there are multiple fees as well as data storage costs for several, parallel data sets.

The expenses associated with all of these technology tools and data sets can rack up very quickly. Then, there are the more implicit costs, such as the costs of compliance executives who have to spend time lifting and shifting data, or manually aligning and analyzing data sets. These costs are indirect and mount up over time. There is also an implicit cost to the firm for having the compliance executive’s attention focused on a less value-enhancing activity.

Having one holistic compliance platform – within which all data lives – that can support multiple functions and offer support across the entire compliance lifecycle means economies of scale can be realized, reducing costs associated with maintaining multiple solutions. Also, because you only store data once in the cloud, hosting costs are slimmed down.

This frees up budget that can be reallocated elsewhere – to automation projects or other areas of the business.

Holistic-Compliance-Consider-the-Full-Cost-of-Cost-of-Ownership-including-Implicit-and-Explicit-Costs

Benefits of Holistic Compliance 

When you consider the total cost of ownership of regulatory technology, you recognize you can essentially use a single data set to power a range of regulatory obligations. But the data can also power other departments within the business. For example, the data collected and stored by compliance can be incredibly valuable to the front office, where access to real-time is now a key element for decision-making and ensuring a competitive advantage.

Do

  • Find out all of the costs – explicit and implicit – linked to your current compliance technology arrangements.

  • Think about the potential use cases for the business that could be built from the data set captured by compliance.

Don't

  • Let adversarial relationships between the front office and compliance get in the way of data-sharing.

  • Let data and technology silos get in the way of reducing compliance costs and enhancing efficiency.

Do Not Leave Holistic Compliance to The Last Minute

These five steps to Comply Smarter™ could serve as discussion starters within your organization about how to rethink your strategic approach to your regulatory obligations and futureproof your technology. Start thinking about the way technology can support your key compliance processes surrounding trade and communications surveillance, best execution, and regulatory reporting, and wider information sharing.

The key principles of holistic compliance

Holistic Compliance - The key principles

  • Lowered Overall Technology Costs
    There is no need for the range of tools firms usually find themselves using or the infrastructure to support those tools.

  • Improved User Experience

    People do not need to log in to multiple platforms and adapt to different UIs. There is just one login and a much more joined-up experience.

  • Reduced Storage Costs

    By storing all the necessary data in one location – in the cloud – costs are dramatically reduced.

  • Increase Time to Add Value

    By liberating compliance teams from wrestling with manual data, they can focus on analysis, reporting, and proactive investigations.

  • Enhanced Risk and Compliance Management

    Improving data governance and automating the compliance approach removes considerable operational risk that can arise from manual data wrangling. It also reduces the risk that something could slip through the cracks.

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