Why strengthening reconciliation functions can help companies remain compliant

Established in 2013, European and UK RegTech leader MAP FinTech specialises in regulatory reporting solutions that arise from a number of complex and challenging international regulatory requirements. As regulator attitudes continue to evolve, how does MAP FinTech think firms can maintain regulatory compliance?

According to MAP FinTech UK business development manager Mark Ellis, two of the key areas that RegTech companies should be ‘frontrunning’ on are reconciliation functions and baseline artificial intelligence for trend analysis.

He said, “A good reconciliation engine offers benefits in transparency to European Securities and Markets Authority and the Financial Conduct Authority over the state of their respective areas of supervision as well as a baseline to build change to the existing regulation that will undoubtedly bifurcate post-Brexit.”

“If you are a firm that has both a UK and EU entity then it’s time to consider monitoring such divergence in reporting requirements, knowing what the requirements were on the 1st of Jan 2021 will not keep you insulated from change and where thresholds may change so you must be aware of your day-to-day reporting activity on a macro level as well as a trade level.”

One of the many contentious topics in RegTech right now is how best to manage money laundering and how best to put into practice strong anti-money laundering (AML) regulations. Ellis believes that RegTechs are well placed to provide solutions to AML issues due to their operational efficiency.

He said, “Regulatory technology and in general RegTech Firms guarantee increased efficiency by streamlining the processes and tasks that need to be done for identity proofing, identity resolution, ongoing AML screening and monitoring as well as transaction monitoring.

“Technology companies that are focusing on the regulatory side of business acquire knowledge – money laundering scenarios – and expertise needed to resolve complex regulatory obligation challenges that cannot be handled manually in anyway.”

Current developments

 Many companies are taking stock of new opportunities as they adjust to new circumstances coming out of the Covid-19 pandemic. According to Ellis, MAP FinTech is using this time to tackle complacency by strengthening its offering.

He commented,” We are currently working on refining our product offering and reviewing our existing solutions. I think a lot of vendors become complacent with what they have built and if this year has shown us anything post-Brexit and during the pandemic, it’s that circumstances and regulator stances change regardless of market sentiment.

“Vendors must constantly ask themselves if their solutions and business model are relevant – and correct – and that the messaging around such is “en vogue” with its existing and future client base.

“That said, we are currently building out a more robust reconciliation process for institutions and well as defining our compliance oversight services that complement our technology stack, there is no point offering a client a “state of the art reporting tool” without them understanding the fundamentals of what it is helping them address.”

In late 2020, MAP FinTech expanded its partnerships with RegTech firm UnaVista and the Depository Trust & Clearing Corporation (DTCC), which is the post-trade market infrastructure for the global financial services industry.

Ellis said, “We are extremely happy with our partnerships thus far and are seeing positive outcomes as a result of our collaboration with UnaVista and DTCC.

“I am always keeping an eye on the market and potential partners to work with and the question of organic vs inorganic growth through partner, joint venture or acquisition is one of timing and market requirements. We are in discussions with several market participants over future collaboration and I would not discount anything occurring within the rest of 2021.

“That being said, every undertaking of reviewing future partners/acquisition is a carefully assessed process and one must be ready to ask the hard question of “this looks and sounds great but does it really get us to where we want to go”, anyone who has looked into partnerships or M&A will know the opportunity cost is high where you are not very clear on what you want to achieve and its imperative to retain clear success criteria to any deal.”

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