In this regard, regulatory technology, better known as ‘RegTech’, becomes particularly pertinent. In brief, RegTech refers to the technology which helps companies deal with their regulatory processes, including compliance matters.

The main objective of RegTech can be said to enhance and make more efficient the compliance process. It operates on a three-pronged objective aimed at:

  • decreasing compliance costs whilst increasing efficiency;
  • improving compliance and lessen risks; and
  • ensuring customer protection.

As one of the main actors of the international business community, especially on the question of compliance, law firms are in our view directly concerned with RegTech. We here examine the possibilities and challenges which RegTech offer to law firms.

RegTech and law firms – Challenges and Opportunities

In our view, RegTech would be a natural choice for law firms involved in cross-border transactions because:

(a) “technology now plays an increasingly fundamental role in financial services and is also a catalyst for change and innovation” (Fintech: Law and Regulation, Jelena Madir, Elgar Financial Law and Practice);

(b) it focuses on agility, speed, increased integration and analytics (BBVA Research, RegTech, the New Magic Word in FinTech (2016); and

(c) the FenTech applications identified by the Financial Conduct Authority of the United Kingdom actually (i) support regulatory compliance in firms (ii) improve regulatory oversight and modernise regulators and (iii) reform regulatory systems and could be considered as a starting point.

The RegTech solutions identified by the Toronto Centre (FinTech Regtech and SupTec: What They Mean for Financial Supervision (2017)) are FinTech opportunities and relevant to law firms namely:

Identity management

Digitalise client on-boarding processes, share customer information, gather and analyse customer and transaction data, identify suspicious transactions based on automated triggers and constantly update customer profiles;

Compliance

(i) enable enterprises identify and changes in regulatory requirements locally and globally and

(ii) automate real-time monitoring of compliance levels and risks based on data analysis;

risk management

Improve risk management process of financial institutions;

Regulatory reporting

Automate and integrate regulatory reporting requirements thereby

(i) reducing costs

(ii) streamlining and increasing accuracy and reporting timelines;

transaction monitoring

Offer real-time transaction monitoring and auditing by using DLT, end-to-end integrity validation, anti-fraud and market abuse identification systems; and

trading in financial markets

Automate procedures related to transactions in financial markets.

The foreseeable challenges to the implementation of RegTech as a novel approach to enhancing efficiency would in our view be the following:

(i) onerous procurement processes;

(ii) preference for large and established providers;

(iii) fragmented market;

(iv) regulatory uncertainty;

(v) concentration risk;

(vi) data protection security and cyber threats (Fintech: Law and Regulation, Jelena Madir, Elgar Financial Law and Practice at 266-268).

Of these four indicators, the main barriers are the question of onerous procurement processes and a known preference for large and established providers. First, lengthy approval processes, on-boarding cycle and decision making of financial institutions hinder RegTech adoption. Secondly, increased interconnectivity will lead to new risks regarding data protection, privacy and cyber threats. Therefore, increased collaboration between financial regulators and FinTech enterprises are to be encouraged to address these concerns.

CONCLUSION

The increased reliance on digital applications of the global village since the start of the COVID-19 era has called for a corresponding need to put into place a more robust legal framework to address issues triggered by technology. Opportunity knocks on the doors of the actors of the international business community to review the existing regulatory processes especially for compliance and adapt to the challenges of the digital world. Law firms are no exception.

Share
X.com LinkedIn Email Save as PDF
More Publications
9 Oct 2024

“Taking Note” may end on a bad note for litigants

The importance of replying to each paragraph of pleadings and the consequence of just “taking note...

7 Oct 2024

The Global - 2024 Q3 Review

The Global sees us share updates and insights from across our network of international offices on th...

1 Oct 2024

Mauritian Supreme Court disregards formality over substance under the New York Convention

On 24 September 2024, the Supreme Court of Mauritius, composed of three Designated Judges, delivered...

8 Jul 2024

The Global - 2024 Q2 Review

The Global sees us share updates and insights from across our network of international offices on th...

3 May 2024

ESG and private equity – towards a new role for lawyers?

Since the outbreak of the COVID-19 pandemic, much has been said on the importance of environmental, ...

9 Apr 2024

The Global - 2024 Q1 Review

The Global sees us share updates and insights from across our network of international offices on th...

10 Jan 2024

The Global - 2023 Q4 Review

The Global sees us share updates and insights from across our network of international offices on th...

10 Oct 2023

The Global - 2023 Q3 Review

The Global sees us share updates and insights from across our network of international offices on th...

15 Sep 2023

Artificial Intelligence and the law

At a time when the implementation of Artificial Intelligence into the professional environment, it i...

17 Nov 2022

Taking Insurance a Step Higher: structured Investment - Linked Insurance Business

In line with the budgetary measures which were announced for 2020-2021, the Insurance Act 2005 (Insu...