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Cody Worthington
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Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Bill Steinman
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Regtech’s role in compliance is expanding

More firms today are using regtech tools to make sure their policies, procedures, and daily activities are meeting compliance obligations.

The tools can be embedded in operational and supervisory processes across multiple departments to make complying with regulatory requirements an integral part of the business process rather than an add-on.

Some developers are using biometric data to track customers and distributed ledger technology so businesses can work together to monitor the same customers.

The Financial Industry Regulatory Authority noted in a recent report that a growing area of development in regtech is understanding employee behavior and customer preferences or risk tolerances.

Regtech must regularly be assessed for its suitability and effectiveness, as recent enforcement actions illustrate.

The SEC in August announced a $4.5 million settlement with Ameriprise Financial Services Inc. over charges that the firm failed to safeguard retail investors’ assets from theft by its representatives.

Five former brokers at the firm were named in the order. The SEC noted that four of those had been identified and fired in 2013, and one in 2016, with three of these individuals going to jail. The settlement involved fraud incidents at offices in Minnesota, Ohio, and Virginia in which client funds were allegedly stolen.

Investigators found that Ameriprise failed to detect some of the diversions either because of programming errors in its surveillance technology for monitoring fund disbursements or because of a failure to follow up red flags.

In June, Morgan Stanley paid $3.6 million to settle similar SEC charges of inadequate supervision and failure of automated systems to detect questionable third-party transactions allegedly used by a former broker at the firm accused of misappropriating $5 million from the accounts of an elderly couple and their family.

The broker allegedly falsified electronic statements, account transfers and forged signatures to exploit what the SEC contends were vulnerabilities in the firm’s controls.

In July, Mizuho Securities USA LLC settled for $1.25 million with the commission for allegedly failing to invest in the technology needed to safeguard information pertaining to stock buybacks by its issuer customers. 

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Thomson Reuters Regulatory Intelligence has launched its third annual, Fintech, Regtech and the Role of Compliance Survey. We’d love to hear from you.

The survey results and accompanying report will provide insight into both the developing regulatory approach and the direction and progress of risk and compliance functions in managing fintech, regtech and insurtech. 

These findings will enable firms to benchmark their own views and preparations against those of peers.

As with all TRRI surveys, information will be treated in the strictest confidence and the results will be shared anonymously through a special report. The survey should take no longer than five minutes to complete.

The survey closes Thursday, October 25. 

To read the second annual Fintech, Regtech and the Role of Compliance Report, which was based on the responses of nearly 800 financial services firms last year, please go here.

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Susannah Hammond is senior regulatory intelligence expert at Thomson Reuters Regulatory Intelligence. She can be contacted here

Julie DiMauro is a contributing editor of the FCPA Blog. She writes best practice articles and speaks about compliance and risk issues in the financial services sector as part of the Regulatory Intelligence group at Thomson Reuters in New York. Follow her on Twitter @Julie_DiMauro and email her here.

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