LeapRate Exclusive… Automated regulatory compliance specialist muinmos has recently been selected to participate in the fifth cohort of the FCA’s Regulatory Sandbox.
The Danish RegTech organisation uses Artificial Intelligence (AI) techniques to help financial institutions to categorise and validate regulatory compatibility for a range of financial products and services on a national and cross border basis.
Remonda Kirketerp-Moller, Founder and CEO, muinmos, joins LeapRate today to let us know details about the company and latest product PASS.
LR: Hi, Remonda, and thank you for joining LeapRate today. Your product, PASS, is the world’s first fully automated cloud-based on-boarding service. Do tell us more about it, please.
Remonda: The PASS regulatory engine is a truly disruptive onboarding solution for financial institutions active in capital markets. It ensures financial institutions remain compliant while onboarding new clients in seconds and enables them to instantly and globally validate whether they can onboard a client in any part of the world.
We developed PASS to solve one of the main issues currently encountered by financial institutions in the onboarding process – the regulatory compliance element in which clients are categorized and the products they wish to trade are assessed for their suitability & appropriateness and cross-border cleared. This part of the onboarding process is always a bottleneck and has until now required significant human resources and the use of complex checklists.
Besides reducing the onboarding time from hours and days to seconds, PASS minimizes the risk of human errors in the process and significantly reduces the onboarding risk as well as the cost for financial institutions. muinmos works with a number of partners in the AML/KYC space, and we have integrated these service providers into PASS, enabling muinmos to handle the full onboarding flow through one single point, either delivered as an API into a financial institution’s onboarding platform/work flow, or as a white-labelled web based standalone solution.
Full automatization of the onboarding process releases significant resource in compliance departments and enables them to focus on more complex assignments and oversight of the onboarding process.
LR: Let’s talk about the complexity of regulatory compliance. From your unique perspective, is more coherence and standardization needed from the regulators in 2019?
Remonda: Yes, absolutely. What is needed is not more regulation, even at an EU level, but more active supervisory cooperation between financial services authorities supported by standardisation and automation through software in order to ensure safeness and soundness of the Single Market and to protect the interests of clients across the EU. EU financial services authorities must actually work more closely together to try and harmonise in areas which should be simple to harmonise. Leaving it as is will simply create an opportunity for regulatory arbitrage which will result in a very uneven playing field in an already complex market.
LR: muinmos uses Artificial Intelligence techniques to help financial institutions to categorise and validate regulatory compatibility for a range of financial products and services on a national and cross border basis. What challenges do you encounter when adopting new disruptive technologies such as AI?
Remonda: New technology such as AI and the change it represents will always be resisted, in particular by older and larger organizations with their own set ways and legacy systems.
Our main challenge in our sales effort is the significant leap forward that AI and PASS represents. It would have been a lot easier for us to sell a half solution such as a cleverly designed check-list or a semi-automated tool box for compliance officers. Change will always be resisted and new disruptive technologies can be daunting, particularly for people in jobs that will be affected. However, that does not alter the fact that change will come.
You can compare the situation to how businesses used to communicate. Initially, companies sent letters by surface mail to each other, then by telex, then fax and now by e-mail. PASS went straight from letters to e-mail and skipped telex and fax. Such big changes can be hard for some people to comprehend, but for the early adaptors, they are a monumental step forward. This is exactly how AI can be seen in compliance.
LR: Do people trust AI nowadays or is it still an unknown territory for the masses?
Remonda: The term AI is used extensively in marketing for FinTech and RegTech firms, and used almost randomly as a buzzword for any type of complex rule engine. This random usage of the term creates confusion for clients and contributes to the uncertainty about the effect of AI and how it can assist. That said, AI is being used by most companies already, for example in accounting solutions where scanned invoices and electronic invoices are filed automatically with no human interference.
The hesitation in regard to trusting AI, I believe, is largely down to the term rather than the effect. In an ideal world, it would make sense to have RegTechs and FinTechs subject to some sort of regulation, especially in areas such as security and technology quality.
LR: Do brokers prefer to let go of perceived control that comes with current manual regulatory compliance process in stages or only in certain parts?
Remonda: You can compare PASS with a self-driven car in which we have installed a steering wheel to give the driver the ability to take control. PASS can handle the full regulatory onboarding of clients without any form of interference, but we have given our clients access to the steering wheel, enabling them to have more control and to make informed decisions based on accurately computed results.
LR: Are you planning on expanding your regulatory data coverage more in 2019 or is it a slow process? What are you working on at the moment?
Remonda: We are expanding our regulatory data coverage all the time and are driven by our clients’ needs and market expansion.
LR: RegTech – what is it and why does it matter?
Remonda: RegTech makes the financial sector more effective and provides better user experiences for clients. Utilized correctly, RegTech such as PASS becomes a competitive parameter and can transform compliance from a pure cost centre to a competitive advantage. Imagine a financial institution that can onboard new clients in minutes and fund client accounts the same day and not weeks later as is often the case today. Besides providing clients with a better user experience, financial institutions will significantly reduce the risk of human errors; humans makes mistakes, machines do what they are programmed to do. Compare RegTech with accounting software, it is almost inconceivable that accountants were doing accounts 30 years ago by hand.
The question we need to be asking is not if RegTech will change the financial sector, but when will it happen and how?