Work management

Why Technology is a Bank Compliance Team’s New Best Friend

  • by Todd Hagen
  • 2 weeks ago

Well, it’s happened. The threat of increasing regulation hanging over Australia’s big banks can no longer be overstated. Now the corporate regulator ASIC is proposing to embed its own staff into Australia’s biggest and best-known financial institutions to tackle misconduct and ensure compliance with banking regulations.

And it’s requesting more money from the federal government to facilitate this expansion of its scope and powers.

“ASIC is looking at a new supervisory focus on Australia’s largest financial institutions and super funds, which will mean more intensive and dedicated supervision and closer co-operation with APRA,” an ASIC spokesman told the ABC.

It could be likened to being forced to sit at a desk next to your teacher; having your boss constantly looking over your shoulder; or maybe being tailed by the highway patrol: not something for which most people would put up their hand.

Banks only really have themselves to blame. Allegations of misconduct have been coming thick and fast since the Royal Commission into banking began public hearings earlier this year, with barely a big banking brand’s reputation going unbesmirched.

Last month we heard one of the big four had been charging dead clients for financial advice. This week, another bank (owned by one of the big four) came under fire for unilaterally altering business borrowers’ loan terms.

Many cases of individual hardship caused by the unethical or illegal behaviour of many of Australia’s biggest banks have been detailed at the Royal Commission already.

And now, after years of treading softly, ASIC has itself come under scrutiny for developing a culture of subservience and acquiescence in relation to the major banks — to the point of allowing lawyers employed by the companies they regulated to draft regulatory changes favourable to the banks while on secondment to ASIC.

In fact, the banks treated ASIC with contempt, according to one former ASIC lawyer: “They lie about big things, they lie about small things, they do it as a matter of course,” he told the ABC.

With a new chairman, former banker James Shipton, who began his tenure in February this year, clearly ASIC intends to show it is doing a much better job of holding the banks to account.

None of which augurs well for banking compliance teams, who are stuck between a rock and a hard place — with more demands upon them to ensure compliance on a greater volume of communications and documents, faster — and now the regulator essentially checking their work.

There’s no doubt the demands on these teams are increasing, not only in terms of outward-facing brand compliance but in terms of monitoring inward-looking compliance processes and managing — and improving — audit requirements. It’s fair to say the spot-checking practices of the past are unlikely to cut it in the future.

Then there are the third-party relationships with mortgage brokers and car finance companies to which banks can no longer afford to turn a blind eye.

Technology can and must be used to shoulder some of that burden, ensuring disclaimers are up-to-date, for example, and removing human error from that process.

Natural language processing can be enlisted to evaluate emails and communications with individuals to ensure they adhere to the rules and red-flag repeated breaches as they occur.

Marketing resource management technology can be utilised to disseminate pre-approved marketing materials and to maintain compliance processes internally within banks, as well as to their external agents.

And technology can be used to amplify the impact of valuable marketing compliance teams, capturing and generating learnings and bringing significant issues to the attention of compliance executives in near-real time.

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