by Benoit Hailly
Managing Director at indigita
June 26, 2018
A thorough understanding of the complexities of cross-border regulation, as well as the uphill struggle banks face with compliance, brought Orbium and BRP together. The upshot is indigita, a company that creates digital solutions.
Two trends have shaped global wealth management over the past two decades: the growing international mobility of clients; and an increasingly complex cross-border compliance landscape. One consequence of this is that some firms have withdrawn from some markets entirely, rather than risk falling foul of regulators. But this in turn has limited the ability of banks to serve their clients as they move about the world.
In a survey by Global Data last year, three-quarters of respondents cited local regulatory changes as a big concern.
The year before, research by Deloitte found that private banks saw compliance and associated reputational risk as one of their biggest headaches.
Unable to master all the details and cover the cost of compliance in multiple countries, banks admitted they were failing to take advantage of cross-border opportunities.
The decision to exit a market is never taken lightly. When the industry is facing a perfect storm – rising costs, growing competition, pressure on fees and evolving customer needs and demands – such a decision is particularly tough.
The problem stems from the fact that every country has detailed and complex regulations. No two countries’ rules are the same, yet highly mobile clients expect their wealth managers to understand and meet local regulations wherever they may be.
Take a Swiss firm with a client living in France. The client might quite naturally expect the Swiss organisation to visit occasionally. But when visiting France, the relationship manager cannot present an account statement and subsequently give sales or service recommendations. Nor can the client sign e-access documents in France. Regulations mean the client must travel to a second country to do so.
Another typical problem facing firms is accounts with multiple signatures located in multiple countries. This creates a very complex situation that must always be tackled as a whole.
To make it harder, regulations are constantly changing, as are their interpretation by the courts. Keeping up is a challenge and failure can result in fines and reputational damage. And the risk of exposure is very real. Regulators are undertaking more cross-border investigations and audits to ensure firms have up-to-date information and train staff adequately, and there have also been cases where clients have sued banks for non-compliant service. In these instances, the bank is exposed at the very least to the level of the original investment, plus fines and, of course, damage to its reputation.
Currently, firms either employ huge compliance departments to keep on top of this, or outsource it to third-party specialists. It’s expensive, time-consuming and not without risk. People get things wrong, fail to see all the relevant regulations or even misinterpret them by mistake.
It was the scale and complexity of the problem, along with the emerging trend for companies to withdraw from some markets, that led two companies – Orbium and BRP – to found indigita, a joint venture with a digital solution to eliminate risk, cut costs and save time.
Orbium is a leading financial-services IT and management consultancy, while BRP is the number one cross-border regulation consultancy worldwide. By combining staff with Orbium’s wealth-management IT skills and with those with BRP’s specialist knowledge, Indigita was able to build a comprehensive cross-border digital solution that plugs into a bank’s core banking system. Indigita compares client data with all the appropriate regulations to come up with a compliance decision.
Launched less than two years ago, indigita as a company has more than 20 clients worldwide and is growing at a phenomenal rate. Its cross-border compliance service comprehensively covers the regulations of more than 140 countries, with daily updates automatically added in real time on changes and court rulings. The speed of change in this area is aptly illustrated by the fact that BRP issues two to three updates on average a day. For major reforms such as MiFID II, the changes are far more frequent as countries gradually develop and issue their own guidelines.
The result is a central source for cross-border compliance that can be accessed via an app, while the indigita API facilitates integration into any IT solution to ensure compliance checks are automated and transparent. Indigita also provides staff training on the different countries in which it is being used. In this way, indigita works to eliminate the risk of non-compliance.
So successful is the service that our clients are beginning to re-enter markets they had previously abandoned, or avoided entering, because of the complexities of cross-border regulation.
Indigita is opening doors to more cross-border business opportunities and allowing banks to offer a truly global service. Like the welcome beam of a lighthouse, indigita is helping wealth managers navigate a perfect storm.