According to fintech industry experts, there are a few ways in which the future of mortgage compliance can go in the next couple of years. Among all of these, artificial intelligence and automation reign as dominant ideas in mortgage compliance services.
The former involves closely looking at data for the purpose of marketing or trying to spot early signs of someone taking out a loan.
On the other hand, automation could be used to make the process of mortgage payment and taking out funds more streamlined, time efficient, or less of an artwork for different people.
Primarily, when it comes to mortgages, there are a few key areas where these are applicable. They are:
This involves utilizing data reading and analysis abilities to make sure all the boxes are checked when it comes to legal compliance, licenses, and terms and conditions.
In theory, the use of artificial intelligence in the area should be able to smoke out when there’s a potential scam or fraudulent loan or phishing scam through the process of discrimination. However, the process of elimination makes it quite iffy. As the tech develops over the next few years, we might see some useful changes here.
Another area where fintech developers wish to see the use of automation is in the process of customer verifications and processing of mortgages, loans, and related transactions. However, the accuracy and the safety of this are still quite suspect.
For consumers, the use of AI and automation in mortgaging lies mostly in the use of virtual chatbots and online assistants. Their expectations are mostly in the realm of having someone answer their questions and provide over-the-clock support. The idea of compliance services, however, is not something that Theta actively thinks about. In fact, a lot of them prefer more human verification processes now since trust in automation is quite limited to certain populations.
So what does that tell us? What we see is a pretty large divide between what fintech experts think of the potential of artificial intelligence versus what the consumers actually feel.
As mentioned earlier, while there is a lot of potential and range for exploring the future technology of mortgaging, the implementation of AI is still quite suspect. In fact, out of an estimation of 65% of mortgaging lenders, only 7% have actually used it. However, with the rate of expansion of AI, it is something that most industry experts are sure will find a way to do sooner or later.
The FinTech industry is growing rapidly. With innovation come legal hurdles that many businesses are not prepared for.
Understanding these complexities is the only way to adapt and thrive. Tackling them early lets your business stay protected while fostering trust with customers. To that end, here are some practical strategies to address FinTech’s most pressing legal concerns.
Staying ahead of compliance is tough, especially in markets where regulations change quickly. Governments often adopt rules to match the pace of innovation, which can leave businesses scrambling to keep up.
Key compliance challenges include:
If overlooked, these challenges can result in fines or even halt operations entirely. The safest approach is preparation and adaptability. Always seek out FinTech legal support from experts to remain abreast of regulatory shifts while focusing on business growth.
Also, regular audits help catch problems early before they escalate into legal troubles. Staying proactive about following laws is less costly than reacting after violations occur.
Data security laws directly influence how FinTech businesses operate. These regulations are meant to protect consumer information but can also limit flexibility in innovation.
Common requirements include:
Neglecting these laws can lead to legal penalties, damaged reputations, or even customer loss. However, if addressed proactively, they don’t have to be barriers. Designing systems that comply from the start lets companies avoid costly overhauls later on.
Secure infrastructure also boosts customer trust, which is critical in an industry that handles financial details daily. Staying compliant can even open doors for partnerships with larger institutions that demand high-security standards before collaboration begins.
Protecting intellectual property (IP) is another must for FinTech companies in an industry that’s growing 12.31% annually. Without safeguards, innovations can be copied, leaving businesses at a disadvantage.
Key IP considerations include:
Neglecting IP protection allows competitors to capitalize on your hard work. Startups, in particular, often lose out when larger players replicate their ideas without consequences. Acting pre-emptively prevents these risks and preserves market edge.
Seeking professional guidance ensures you file correctly and enforce rights effectively if disputes arise. With robust protections in place, your business stays ahead by focusing on innovation instead of fighting costly legal battles over stolen ideas or branding conflicts.
FinTech companies handling cross-border payments face unique legal hurdles. International regulations can be inconsistent, making compliance a complex task.
Common challenges include:
Ignoring these complexities risks financial penalties or strained relationships with international partners. Proactively researching and addressing these issues keeps operations running smoothly without delays caused by regulatory hiccups.
Collaborating with legal experts who understand global laws ensures your company stays compliant while expanding into new markets. Properly structured contracts also prevent disputes from arising between you and overseas collaborators, reducing unnecessary conflicts in the future.
As mentioned, trust is crucial in FinTech, since users are required to share sensitive financial data with service providers. Strong consumer protection policies reassure customers that their interests come first.
Key areas to focus on include:
Transparent practices help avoid legal issues stemming from unclear or unfair policies. When customers feel protected, they are more likely to stay loyal and recommend your services to others.
Regularly updating these policies as regulations evolve ensures they remain effective and compliant. Simple communication about how you handle customer concerns builds credibility over time, positioning your company as a trustworthy leader in the industry. This is one of the reasons that 37% of people now see FinTech brands as more trustworthy than traditional financial institutions.
The bottom line is that addressing legal complexities in FinTech is the foundation of sustainable growth. Prioritizing compliance, securing data, protecting intellectual property, and earning trust through transparency lets businesses thrive in this dynamic sector. Proactive measures today prevent costly setbacks tomorrow, so your FinTech venture stays innovative and resilient in the face of stiff competition.
Exciting and challenging as it may seem to take your business global as CEO of the company, establishing oneself abroad and generating new streams of revenue is offered by foreign marketplaces, but there are drawbacks largely related to complex international tax regulations. Apart from complying with regulations, these hurdles require that the company is seen as viable in the global market for long-term success. This article will teach you about international taxation trends that could steer your firm toward profitable and smooth expansion.
To conduct business in any foreign market, it is vital to have an understanding of the various tax rules that govern them. Tax laws are country-specific, with each jurisdiction having its own unique set of regulations, rates, and incentives. For U.S.-based businesses expanding abroad, this could mean complying not only with local tax laws but also with U.S. tax obligations such as issuing Form W-2 for U.S. employees working internationally or 1099 forms for contractors providing services from abroad. Failure to comply with these U.S. reporting requirements could lead to complications that undermine the success of your expansion.
Operating in international markets requires paying local taxes and adhering to local regulations. However, U.S.-based companies with American employees or contractors abroad must also maintain compliance with U.S. tax laws. For example, companies hiring U.S. citizens abroad may need to issue a Form W-4 to determine the correct tax withholding or collect Form W-9 from independent contractors for proper identification and tax reporting. These forms ensure that your company remains compliant with both U.S. and foreign tax systems, reducing the risk of penalties and legal issues.
Transfer pricing is one of the most popular issues in international taxation because it involves setting prices for goods, services, and other intangible items among related companies with different locations. This should be done while ensuring that the tax authorities monitor them to verify if market trends are being adhered to to prevent unwarranted earning transfers to lower-tax jurisdictions.
Handling transfer pricing should therefore require your business’ procedures to comply with internationally accepted standards, such as OECD recommendations, which ensure that no argument can emerge between you and tax officials and would save you a lot of money, including penalties. To avoid unnecessary disputes that would attract heavy financial penalties, stress, and bad reputation, it is important to adhere to these principles and maintain adequate documentation.
Tax incentives to attract foreign capital have been offered by numerous countries. These incentives in the form of reduced tax rates and R&D credits can be very helpful instruments for your company’s taxation position as it goes global.
However, such benefits usually come with caveats attached to them. If associated requirements are not satisfied, such benefits might be rescinded, and you will pay higher taxes. Consequently, they need to be made use of with adequate preparation and understanding of their advantages.
Going global with your company opens up a world of possible severe taxes from continuously changing rates with foreign exchange rate variable inflows affecting fiscal liabilities on revenues generated abroad, leading to potential tax obligations. Unfortunately, your company may incur losses and would not be able to survive fluctuations.
Another way to deal with unfavourable fiscal positions is through hedging, which reduces these risks and stabilizes cash flows. You could also learn how various international tax systems treat foreign exchange gains and losses so as not to be caught off-guard when the time comes for filing taxes.
Presently, the world is highly digitalized, and technological advancements have made complex tax laws easy to navigate. Biometrics are used for time tracking; therefore, payroll data files such as pay stubs online are important for verifying this. Strategies work through effectively making use of tools in human resource management, which enable people to adapt to changes within tax systems. Consequently, taking into account global competitiveness, ThePayStubs offers tools for improved payroll systematization, hence impressing tax authorities by proving compliance with any or all of their requirements at a time. The management of a multinational corporation should utilize such cutting-edge technology if they desire to develop their business through profitability.
Consequently, the ability to effectively navigate the complexities of foreign tax regulations is the main factor that can determine whether or not your company will be a success as you expand globally. For a CEO, this is no easy job. By knowing about it, ensuring compliance, taking advantage of tax benefits, and adopting technology, one may navigate through intricate international fiscal affairs.
When entering new markets, it should be an investment decision for the firm’s future rather than just expanding its operations. If a business has appropriate tools and knowledge available, it can use international taxation as a guide to achieve long-term sustainable growth as well as profits.
Managing a Self-Managed Superannuation Fund (SMSF) can be both empowering and complex. As a trustee, you have the responsibility to ensure compliance with regulations while maximizing returns for your retirement savings. This dual role requires a clear understanding of your obligations and strategic financial management. Here are essential strategies to effectively manage your SMSF, focusing on compliance and maximizing returns.
Crafting a robust investment strategy tailored to your risk tolerance and retirement goals is fundamental. Diversifying investments across asset classes such as equities, property, fixed income, and cash can mitigate risk and enhance returns over the long term. If you live in Australia, SMSF compliance services in Perth can establish an investment strategy and ensure regulatory adherence for your fund. Regularly review your strategy to ensure alignment with changing market conditions and personal circumstances.
To safeguard your SMSF, understanding compliance regulations is crucial. Compliance includes adhering to contribution limits, investment restrictions, and reporting obligations to the Australian Taxation Office (ATO). Failure to comply can result in penalties or loss of tax concessions. Stay updated with current legislation and seek professional advice to navigate complex compliance issues effectively.
Active monitoring of your SMSF’s performance is essential for achieving optimal returns. Regularly review investment performance, costs, and overall fund liquidity. Assess whether your current investments are meeting expected returns and adjust your strategy accordingly. Conduct annual audits and stay informed about changes in taxation and superannuation laws to maintain compliance.
Navigating SMSF regulations and investment complexities can be challenging. Engaging a qualified SMSF specialist or financial adviser can provide invaluable guidance. They can assist in setting up your fund, developing an investment strategy, and ensuring ongoing compliance. Professional advice helps minimize risks and maximizes opportunities within the regulatory framework.
Implementing effective tax planning strategies is integral to maximizing your SMSF’s returns. Utilize concessional contributions, such as salary sacrifice arrangements, to optimize tax benefits. Capital gains tax management and franking credits on dividends can further enhance after-tax returns. Regularly review your tax position with a tax professional to capitalize on available opportunities.
As retirement approaches, transitioning your SMSF into the pension phase requires careful planning. Understand pension payment requirements and minimum withdrawal rules to maintain compliance. Continuously review investment allocations to balance income generation with capital preservation. Seek advice on estate planning considerations to ensure seamless wealth transfer upon your retirement.
Credit: Campaign Creators
Effectively managing your SMSF involves a proactive approach to compliance and strategic financial management. By understanding regulatory requirements, establishing a diversified investment strategy, and engaging professional advice, you can navigate complexities and optimize returns. Regular monitoring, tax planning, and thoughtful retirement planning are key to achieving long-term financial security.
An Interview With...
Julia Shamini Chase
Pioneering Compliance Leader and CEO of Gold Leaf Consulting Limited
Recently, Finance Monthly was delighted to speak with Julia Shamini Chase, the Founder and CEO of Gold Leaf Consulting Limited. Julia Shamini is a highly respected figure in the BVI regulatory law and compliance arena. With an exceptional track record and unwavering dedication to excellence, Julia Shamini has positioned Gold Leaf as the gold standard in the compliance industry. She is a highly sought-after authority in the British Virgin Islands regulatory and compliance regime and beyond. Julia Shamini brings a wealth of expertise and experience to compliance consulting.
In this article, we delve deeper into Julia Shamini's insights into the BVI regulatory regime and explore her perspective on anticipated changes and upcoming trends, offering readers a comprehensive understanding of the regulatory landscape in the BVI.
How would you describe the current regulatory environment in the BVI, and how has it evolved over the years?
The BVI business company (BVI BC) and the broader BVI financial services industry are widely recognized as essential enablers of global commerce, establishing the BVI as a prominent international financial centre. With the evolution of its financial services landscape, the BVI has progressed from primarily facilitating company incorporations to offering value-added services encompassing corporate, commercial, fund management, and succession planning products. The BVI BC has gained popularity as an asset-holding vehicle and secured listings on international stock exchanges.
To support its sophisticated offerings, the BVI has developed a robust regulatory framework to prevent misuse of its products, services, and jurisdiction for illicit activities such as money laundering, terrorist financing, and proliferations financing. Compliance with the FATF recommendations and OECD guidelines is a priority for the BVI, demonstrated through its ongoing good standing ranking and membership in the Caribbean Financial Action Task Force.
Building upon its solid foundation, the BVI introduced comprehensive legislation for virtual asset service providers in February 2023, following the establishment of the BVI Fintech Sandbox regime in 2020. The Sandbox regime allows eligible fintech service providers to test their innovative products and services in a quasi-regulated environment.
Investors have consistently shown interest in leveraging the BVI’s exceptional financial landscape to facilitate their trade. In summary, investors recognize the BVI as an all-encompassing business environment emphasizing a harmonious blend of innovation, usability, and regulation.
Gold Leaf has been an active observer and stakeholder, witnessing and participating in the evolution of the BVI’s regulatory landscape. Our deep-rooted relationship with relevant stakeholders and regulators has enabled us to foster a strong understanding of expectations and priorities. Through my appointment as a member of the BVI FSC’s Fintech Steering Committee, we have actively contributed to shaping the virtual assets regulatory landscape in the BVI. Through these collaborations, we have provided valuable insights and perspectives, ensuring that the BVI’s regulatory framework remains robust, transparent, and responsive to the needs of businesses and investors.
In September last year, the BVI Financial Services Commission approved the Territory’s first investment business license, which authorizes the holder to operate a cryptocurrency exchange. Can you tell us more about it?
The approval of the BVI’s first cryptocurrency exchange license marked a momentous occasion for the jurisdiction and Gold Leaf as the regulatory counsel behind the successful licensing application. We take immense pride in having played a pivotal role in preparing and overseeing the application on behalf of our client, ensuring compliance with the stringent regulatory requirements. Our client was also the inaugural participant in the BVI Fintech Sandbox license. Through strategic planning, we successfully navigated the licensing process. We utilized the Sandbox regime to facilitate our client’s operational familiarity within the BVI’s regulatory landscape, fostering innovation and a secure virtual asset ecosystem.
During the Sandbox phase, as regulatory and compliance consultants, we assisted our client in developing and enhancing their policies, controls, and procedures to ensure compliance with BVI regulatory requirements. Once our client was confident operating within the BVI’s regulatory framework, we applied for their full Category 7 license under the BVI Securities and Investments Business Act 2010 (SIBA) specifically for cryptocurrency exchange platforms. We continue to act as regulatory counsel and as the approved compliance officer for our client, through Gold Leaf Corporate Compliance Services Ltd., the licensed corporate compliance service provider arm of Gold Leaf’s business.
The enactment of the BVI’s Virtual Assets Service Providers Act, 2022 has expanded the regulatory regime for BVI entities and legal arrangements involved in virtual assets. This legislation complements the existing regulatory framework, supports fintech development, and aligns with international standards for virtual asset regulation. This has not only bolstered investor confidence but has also attracted a new wave of entrepreneurial ventures to the BVI, positioning the jurisdiction as a favorable destination for cryptocurrency-related activities.
What makes BVI so attractive to institutional investors in the crypto industry?
When discussing the attractiveness of the BVI to institutional investors in the crypto industry, it would be remiss of me to not only highlight the jurisdiction’s favorable regulatory environment which I will discuss in more detail, but also its natural beauty. The BVI’s unique combination of regulatory excellence and breathtaking surroundings contributes to its appeal as a preferred destination for institutional investors in the crypto industry.
In addition to its stunning beauty, the BVI offers the following key elements that make it attractive to institutional investors in the crypto industry:
What other trends do you expect to see around regulation and compliance in the British Virgin Islands?
The BVI has consistently demonstrated its foresight and tenacity to evolve and adapt as a leading offshore finance centre. At Gold Leaf, my team and I actively engage in monitoring and analyzing emerging trends that shape the regulatory and compliance landscape in the BVI. As a forward-thinking and commercially minded consultancy firm, we anticipate several key areas of focus in the BVI’s future regulatory and compliance landscape:
As a jurisdiction, we are certainly set to continue our path of furthering regulatory and compliance advancements. These trends reflect the BVI’s commitment to staying at the forefront of regulatory best practices, embracing technology, and maintaining a robust and trusted financial ecosystem.
How does Gold Leaf ensure that your clients stay ahead of the curve when it comes to complying with new and changing regulations?
At Gold Leaf, we take pride in our commitment to keeping our clients ahead of the curve when it comes to complying with new and evolving regulations. Our approach combines proactive measures, industry expertise, and cutting-edge solutions to deliver exceptional compliance services.
How does your company approach balancing a client’s business goals with their regulatory obligations?
Our clients are leaders in their respective markets and industries. We appreciate that they must maintain a keen focus on their business productivity and profits. In balancing their business goals with their regulatory obligations, our approach is underscored by our mission to become our clients’ trusted partners, enabling them to achieve compliance excellence and peace of mind. Our team at Gold Leaf possesses not only extensive knowledge of regulatory frameworks but also a deep understanding of business operations and strategies. This distinctive combination of regulatory expertise and business acumen allows us to effectively guide our clients in navigating the complex landscape of compliance while achieving their business objectives.
We demonstrate this actively through:
Our approach to balancing a client’s business goals with their regulatory obligations is rooted in our client-centric philosophy, customized solutions, proactive planning, streamlined processes, and a commitment to safeguarding their reputation. In every engagement, we are our clients’ trusted partner, allowing them to focus on their core business while we provide comprehensive compliance support. Trusting us to deliver gold-standard solutions, our clients can achieve compliance excellence, peace of mind, and perpetual business growth.
About Gold Leaf Consulting Ltd
Gold Leaf has established an unparalleled reputation for delivering tailored, practical, and efficient compliance frameworks, making them a trusted partner for organizations navigating the complex regulatory landscape. Under Julia Shamini’s astute leadership, Gold Leaf has achieved an outstanding milestone—an impeccable 100% track record for the approval of licensing applications in the BVI. This remarkable achievement speaks volumes about Gold Leaf’s expertise, meticulous approach, and deep understanding of the regulatory landscape. Clients entrust Gold Leaf with their licensing aspirations, knowing that their applications are in the hands of a proven industry leader.
Gold Leaf’s commitment to its clients extends far beyond licensing approval. Organizations seeking to navigate the intricate web of compliance requirements highly value Gold Leaf’s sought-after services. With their comprehensive understanding of evolving regulations and a practical, client-focused approach, Gold Leaf offers tailored compliance solutions that enable businesses to thrive while upholding the highest standards of regulatory adherence.
Contact:
Gold Leaf Consulting Limited
Units 6 and 7, Road Reef Plaza
Prospect Reef, Tortola
British Virgin Islands
T: 1-284-494-9559
Compliance should go beyond simply ensuring that all employees understand and follow the law, rather it should be an integrated part of your company’s values. By fostering a culture of compliance, employers can ensure their employees are aware of applicable laws, regulations, and policies while also providing them with the tools they need to remain compliant. Doing so not only protects businesses from potential legal action or financial losses due to non-compliance issues, but it also helps create an atmosphere where employees feel safe and secure in their work environment.
Compliance is ultimately an individual responsibility, but employers still have a significant role in helping employees become compliant. When you have a complaint and, more importantly, an ethical workforce, your business is better protected against potential risks. Whether you want to implement bigger hand hygiene compliance in your business, or you want to make your employees more compliant in the context of data protection, you, as an employer, need to lead by example. Most of the following strategies can be implemented in any work environment:
Employers should lead by example when it comes to compliance. Demonstrate the importance of compliance by adhering to safety protocols and legal requirements yourself, such as wearing a face mask in places where it is required or maintaining social distancing rules. This will show your employees that you take compliance seriously, which will help foster an atmosphere of trust in the workplace. If you’re not following the rules yourself, it’s unlikely that your employees will.
It’s important to set clear rules and regulations for your employees to follow. Be sure to document any policies and procedures in writing, distribute them among all staff, and make sure everyone understands what is required of them. Create a system of enforcement for when the guidelines are not followed, such as corrective action or suspension for major infractions. Moreover, expecting employees to be compliant will help drive the point home.
Proper training is essential for promoting employee compliance. Make sure all new employees receive training on applicable laws, regulations, and policies upon joining the team. This will help ensure that your employees are aware of their responsibilities from the start. For existing staff, regular refresher courses should be conducted to evaluate their understanding of compliance rules and regulations and update them on any new policies. Furthermore, make sure your team has access to the necessary tools, resources, and information needed for them to stay compliant.
Employers need to make sure all employees understand the consequences of not following compliance rules and regulations. Let them know that there may be serious legal, financial, or other repercussions if the rules are not followed. This will help ensure that employees take compliance seriously and think twice before disregarding any policies or procedures. However, it is very important to create the difference between a work environment that promotes compliance, from a toxic work environment where compliance is forced upon employees.
Making sure everyone is up-to-date on the latest compliance rules and regulations can be a challenge. Using communication tools like email, intranet platforms, or newsletters to provide regular updates is an effective way to keep everyone informed. This will make it easier for employees to remain compliant and give them access to any new information they might need. For instance, if there are changes in the safety protocols, it’s important to make sure everyone is aware of them.
Technology can also be used to track compliance issues. For instance, if you want to ensure that your employees are following safety protocols such as wearing face masks or washing their hands regularly, there are various tools available that will help you monitor and enforce compliance. These systems can alert supervisors when an employee is not compliant with a particular policy or procedure and take the necessary steps to address the issue.
Employers need to encourage open dialogue between employees and management so that any concerns or questions about compliance can be addressed. This will not only help create a culture of trust but also make sure that everyone is on the same page when it comes to the rules and regulations. Additionally, having an open channel of communication will allow employees to share any ideas or suggestions they might have for improving compliance.
Recognizing and rewarding compliant behavior is a great way to motivate employees to stay compliant. This could be anything from verbal recognition or public praise to tangible rewards such as bonus points, vouchers, or even prizes. Rewarding staff for their compliance will help promote the message that following protocols is important for the success of the organization and encourage others to do the same.
It’s important to assess how well employees are following the rules and regulations. Regular audits or reviews should be conducted to check if everyone is compliant with the policies. The results of these reviews can then be used as a benchmark for improvement or further training if needed. Furthermore, it can help ensure that all employees are up-to-date on the latest compliance policies and regulations.
The compliance landscape is constantly changing, so it’s important to stay on top of industry developments. Employers should regularly monitor changes in the regulations and amend their policies accordingly. This will help ensure that everyone remains compliant and there are no unforeseen issues or surprises when it comes to compliance requirements.
By following these tips, employers can create a work environment that promotes compliance and makes sure that everyone follows the rules and regulations. This will help create a safe, efficient, and productive workplace where everyone is working towards the same goal. Additionally, it can help protect employers from any potential legal issues or financial penalties due to non-compliance.
But as with any emerging technology standard, progress is littered with both milestones and speed bumps. Below I will outline some of my key observations from working with leading players in this space.
It is no longer a question of if Open Banking will continue to evolve, but a question of how quickly it will accelerate. As Open Banking’s remit continues to expand, it will fundamentally change how we use financial products.
Open Banking can be used to assess a consumer’s creditworthiness, for example, by opening the doors to novel products aimed at supporting financial health and inclusion.
The complex world of credit scores will be simplified through the transparency Open Banking provides. Authorised Open Banking fintechs can securely access a customer’s bank account to see incoming and outgoing transactions, providing a foundation from which to accurately assess users’ credit scores and personalise services accordingly.
Personal Financial Management platforms (PFMs) like Money Dashboard are leveraging Open Banking technology to provide their clients with insights into transaction behaviour. Its retailer clients, such as supermarket chains, benefit from a better understanding of what their customers spend their money on when they are shopping at other stores. Its investor clients, meanwhile, use the data to predict how companies are operating in order to decide whether to invest in a stock.
Another example of a company paving the way forward is Bud – which is demonstrating what is possible through Open Banking-powered personalisation and AI automation. Banks use Bud’s products to automate lending decisions and perform more accurate affordability checks – improving risk assessment while delivering more tailored services to their customers.
In the future, Open Banking will evolve into Open Finance, meaning that data-sharing will not be limited to transactional bank account data only. Other types of (financial) information will become accessible to authorised third parties, creating a more interconnected financial ecosystem.
Crypto wallets, pensions, insurances, mortgages, stock trading and other wealth management accounts – will all become accessible to facilitate easier exchanges of data, helping providers to establish a comprehensive digital overview of a customer’s financial position and encourage continued innovation.
These benefits will not be limited to retail customers. Another important area of expansion will be to use Open Banking solutions in the B2B space. Highlighting the potential use-cases, McKinsey estimates that merchants collectively spend $100 billion annually on transaction fees. Through account-to-account (A2A) payments, Open Banking players are already enabling the direct transfer of money between accounts without relying on third-party intermediaries or payment cards – offering a real-time and cost-effective solution to the problem.
There are three main obstacles on the road to Open Finance:
1. Access to data
How do we make it easy for providers to access data from a broad range of financial institutions? Technological integrations (APIs) must be built to support the efficient flow of data, but building integrations that work with each financial institution is a tedious and fragmented process. To facilitate this, data and API standardisation needs to be implemented in order to make the task of providing access to data across the whole ecosystem simpler.
On the other hand, the reluctance of institutions to share highly valuable customer data will restrict access. This means regulators will need to step in – as they did for Open Banking – to create a legal environment that opens financial data for third parties to access through standardised APIs.
2. Analysing the data
Making sense of huge volumes of data is already a gargantuan task, even when it “only” covers Open Banking data. This becomes even harder if data from a wider set of financial products is considered. Fintechs will need advanced categorisation engines and other analytical tools to structure and analyse the information they receive.
Fintechs and companies can have access to all the Open Banking data in the world, but if they cannot create a way to analyse it, they will struggle to draw out any valuable insights. Leading providers like Money Dashboard have already done the legwork when it comes to data analysis – its Open Banking categorisation engine has been trained on over 10 years of data, which allows it to accurately classify consumer transactions. Other providers must follow suit if they haven’t already.
3. Compliance
Whenever personal information is shared, it is crucial to have a stringent compliance framework in place, to prevent any breaches or misuses of data. This, however, is not the challenge – the real challenge is ensuring that regulation protects the consumer, without stifling innovation.
In order to achieve this delicate balance, regulators will need to have open and constructive dialogues with Open Finance providers, and together create an environment that nurtures innovation without threatening data privacy.
Open Banking is still a relatively early-stage technology, so we will continue to see a lot of investor activity in this space, with the market expected to grow to $43 billion by 2026.
Companies with an innovative product and state-of-the-art tech will have no problems raising funds. For instance, UK-based Bud raised $80m in June to continue to scale its AI-based Open Banking platform and expand internationally.
In the M&A space, we expect to see an increase in activity as small, unprofitable companies (who have developed good technology) might decide to look for a buyer as Venture Capital funding becomes harder to access. Some of the industry’s largest players could also merge in order to consolidate the market, create synergies and expand their reach.
Notably, Apple’s recent acquisition of Credit Kudos, which develops software that uses consumers’ banking data to make more informed credit checks on loan applications and is a challenger to the big credit reporting agencies (Equifax, Experian and TransUnion)., signals interest from further afield. With more and more businesses making inroads into financial services, M&A activity in this space is heating up.
Having advised on a number of M&A and fundraising transactions in the Open Banking space, Royal Park Partners have seen first-hand the impressive leaps companies are making to transform Open Banking and increasingly Open Finance into a positive and productive tool for customers and businesses. In the future, Open Finance will provide the infrastructure to connect all financial products that consumers and businesses use, while also providing access to innovative new solutions.
The digital imperative for financial services firms cannot be understated. In order to ensure their (and their products’) relevance in the future, they will have to embrace Open Banking and Open Finance technology.
About the author: Ricardo Falter is Fintech M&A Associate at Royal Park Partners.
Kelly-Ann has 13 years of experience in the compliance & risk management industry including both as a practitioner and as a solution provider.
MyComplianceOffice is the leading provider of Conduct Risk Solutions to the financial services sector, with a focus on Conflicts of Interest challenges, the ability to identify, detect, and prevent misconduct and ensure adequate controls in mitigating these risks.
Why is creating a strong culture of compliance mandatory for financial services firms?
Creating a culture where regulatory obligations and ethics are embraced should be the foundation of any firm, regulatory or otherwise. But over the years, we have seen banks may pay more than $200 billion in fines since the financial crisis (and that number is growing!), which shows there is still more work to be done. These years of continuous failures in large and small firms to follow regulatory best practices, but worse, put the self-interest of themselves above the interests of their own clients and the public leads to a lack of trust in the market. Thus, embedding an appropriate culture of compliance from the top-down, bottom and across the middle is more than just a mandatory requirement, but it is an expected behaviour across firms.
What are your key tips for successful compliance and conduct risk management for financial services companies?
As I’ve mentioned, creating a culture of compliance is everyone’s responsibility within a firm, and that must start with some basics, as well as enforcing behaviour along the way. There are three key areas I see as assisting to embed the culture of compliance:
What are the benefits of having a centralised compliance management platform?
Disparate solutions for managing employee compliance, in particular, mean there isn’t a consistent way for your employees to interact with compliance, yet for compliance officers, it means a ‘swivel-chair’ compliance function, reducing the time to act on potential areas of concern. By using a solution like MyComplianceOffice you are enabling conflicts of interest to be detected when they occur, rather than days or weeks after the potential conflict arose. For example, if your firm is looking to conduct research on a particular business entity, which is listed in Europe, you have employees who hold stock in a subsidiary of this firm, and your company has also provided a lot of gifts to this firm, if you didn’t have a consolidated system, you would have to check at least four systems to determine if there are any potential conflicts, where as with an integrated solution, the clearance conflict check on this business entity should identify the conflict immediately. That is the type of benefit a centralised solution can provide to front office and compliance teams.
What role does technology play in creating a culture of compliance?
Technology can be implemented in many areas of the compliance value chain, and all of these areas are important to instilling a culture of compliance:
Solutions like MyComplianceOffice can be used to both distribute and enforce the completion of such activity, you are assisting in creating the appropriate culture.
What are the advantages of MyComplianceOffice’s compliance management platform?
MyComplianceOffice’s single integrated solution provides an easy Software as a Service (SaaS) platform for small and large firms to get started in embedding an integrated compliance management solution. Our software can assist firms with all aspects of Employee Compliance, Third-Party Risk as well as Firm Trade Surveillance to provide near real-time conflict checking across multiple data elements. Our solution uses integrated third-party company and security data to allow firms to quickly identify conflicts across all elements of their business.
What problems does technology like MycomplianceOffice solve for its customers?
MCO’s customers range from as small as 10 staff through to 100,000 and as such the breadth of challenges these firms face can be varied. However, at its core, our customers are challenged with the ability to provide timely, auditable and adequate information to regulators. A traditionally paper-based workflow becomes difficult to keep up with as your firm grows, some of our smaller firms have found that moving to technology has repurposed a compliance officer onto more productive activities. Some of our larger firms are challenged with disparate information in multiple different systems, that means traditionally slow turnaround time in clearing conflicts so front office teams can in fact do the needful and conduct their business. By moving to a single integrated solution where Deal Transaction Conflicts, Firm Trading and Employee Conflicts are managed in one solution, this time is significantly reduced.
Contact details
Website: mycomplianceoffice.com
LinkedIn: https://www.linkedin.com/in/kellyannmchugh/
Email: advance@mycomplianceoffice.com
Peter Ku, VP and Chief Financial Strategist for Informatica, outlines the challenges posed by the transition and how firms can turn them into opportunities.
The London Interbank Offered Rate (LIBOR) underpins some $240 trillion in financial contracts, and with just 11 months to go until the move to risk free rates, Sterling Over Night Indexed Average (SONIA), financial services firms are under pressure to finalise this complex change programme.
Widely considered one of the biggest transformation programmes undertaken by modern financial services firms, the shift away from LIBOR is a complex business challenge which impacts teams across the business. Failure to adequately prepare represents significant operational risk. Why? Because at the heart of it all is data – what is it, where is it, how is it connected, governed, and made available to the business. Board level committees, cross-functional teams and significant resources have been dedicated to managing this intensive and – at times – painful process. However, it’s not all imposition; there are meaningful upsides to having trusted, governed and relevant data, shifting it from tool to strategic business asset.
The Bank of England recently published an updated 2021 Roadmap, outlining key milestones that need to be met in order to prepare for the LIBOR transition. It suggests that by the end of Q1 2021, organisations will have completed the identification of all legacy LIBOR contracts. For banks that have hundreds of systems – each with thousands of indexes – locating and tracking the lineage of this data across all systems is a mammoth task.
After completing the LIBOR data inventory, firms can begin conducting an impact analysis on all existing LIBOR contracts. This is a crucial, in-depth exercise covering a number of areas. What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk? Data quality is paramount to being able to perform accurate analysis and in turn manage risk. It’s important to keep in mind that a change of a single data point will impact multiple systems and, in most cases, hundreds of reports. Therefore, having confidence that the data is accurate and trusted is essential. Finance and accounting teams will need to update risk and valuation models once the risk exposure is identified. These include valuation models, pricing future revenue streams and how those impact daily, monthly and annual reporting.
What will the financial impact be of switching from LIBOR to SONIA? What is the market, operational, credit and reputational risk?
Alongside this work, legal and compliance teams will be working to review and replace fall back language in LIBOR contracts which expire in 2022 and beyond. The roadmap published by the Bank of England working group suggests that firms complete these conversions by the end of September 2021. The success of this maps back to the data inventory, and whether teams are able to determine which systems service which contracts, and adequately address corrupt data.
The singular thread through it all, whether it be those managed by legal and compliance, finance and accounting, or risk management, is a dependency on data that is good for use. Unfortunately, many organisations today still struggle with data quality. There are instances where the correct data just isn’t available, or it’s unclear where the data is located or how it is connected to other indexes. This is a continuous work in progress but the conversion from LIBOR to SONIA is undoubtably driving improvements in the automation and scale of existing data governance projects.
The LIBOR transition may be a landmark one, but it certainly won’t be the last challenge for the financial sector, which will continue to face increasing market pressures fuelled by rapidly emerging technologies, global interconnectedness, changing economic and jurisdictional factors, and consumer demands. It is the adoption of cloud-based technologies and steady foundation of intelligent data governance that will deliver sustainability, resilience and efficiency moving forward.
As Chief Data Officers round out these gargantuan programmes, a continued focus on two core areas will accelerate the shift of data governance from an IT-centric discipline to a core business function that empowers all within the organisation to be more data-driven.
First, there needs to be a continued focus on resolving data quality issues. Data quality management should be proactive, measured, monitored, and communicated across all data stakeholders from data engineers, analysts, stewards to executive business decision makers. This will ensure data quality management is transparent, predictable and measurable.
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Secondly, users need to leverage tools and technologies to make data governance processes more automated and agile. AI-driven data governance solutions can operationalise data governance by decentralising data stewardship and enabling self-service stewardship to reduce the cost to the business, while still allowing data governance to scale.
Data is the new currency of financial services firms. Forward-thinking organisations will view the overhaul required to move away from LIBOR as a stepping stone to turn data management challenges into opportunities.
Ilia Sotnikov, VP of Product Management at Netwrix, looks at the state of cybersecurity in financial services and the external factors that drive it forward in 2021.
The past year has required financial teams and organisations to review many of their technical processes, especially as employees were forced to work remotely almost overnight. Research shows that 30% of financial organisations feel they are now at greater cybersecurity risk now than they were pre-pandemic. The majority (64%) are concerned about both more frequent cyberattacks and the security gaps caused by remote work – but despite this increased concern about malicious activity, the most reported incidents for financial firms involved human errors.
As a result, 2021 will certainly see financial organisations reassessing their data security policies to be fit for purpose in a post-pandemic digital world. However, given the wide range of financial services emerging, financial organisations today are on very different security maturity levels. Some have consistent ongoing risk management, established processes and dedicated IT security teams. Others just expect IT operations to handle security as part-time assignment. Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.
The good news is that moving into 2021, these organisations will be driven to increase security maturity by external factors: cyber insurance and privacy regulations. With 2021 bringing both new privacy laws and stricter enforcement of existing regulations to minimise the risk of incurring steep fines for compliance failures, businesses will turn to cyber insurance.
The bad news is those policies will come with their own security standards and requirements, such as regular risk assessment and effective detection and response capabilities.
Many financial organisations from the less technically mature side of the spectrum or still heavily rely on legacy systems simply don’t have internal motivation to adopt better security practices.
In 2020, many privacy-related bills were pushed down in priority due to more urgent tasks related to global pandemic. However, this isn’t an issue that will go away. Any British or European businesses that deal with local or international markets have to comply with GDPR – and with Twitter’s recent fine of approximately €500,000 for failing to promptly declare and properly document a data breach marking the first cross-border GDPR ruling, there will be a renewed vigour in the finance industry to ensure compliance. Furthermore, payments-related legislation such as PCI-DSS and PSD2 will face further strains given that a huge consequence of the pandemic has catalysing the move of payments becoming cashless.
This renewed focus on privacy laws require financial organisations to pay more attention to what data they have on hands, how they handle this data, and who is accessing it and why. Failing to document this or to follow documented policies can result in significant fines in case of consumer complaints or a data breach. This may force finance firms to adopt security and data governance practices they did not have in place this year.
The other driving factor for financial firms to revamp their data security measures is cyber insurance. The cyber insurance market is growing rapidly at an impressive 26% CAGR. This growth is fueled by the surge in cyberattacks and businesses seeking to offset their risks, and executives and board members recognising potential breaches or ransomware threats as business risks.
Finance companies are more likely to turn to insurance as an option to deal with the potential cost of these new risks. However, cyber insurance is not a “pay-and-forget” thing. To lower the risks that their customers will be breached, cyber insurance carriers are requiring them to comply with their own security standards, such as regular risk assessment and effective detection and response capabilities. This way, cyber insurance carriers contribute to the growth of security solutions that provide such functionalities. Finally, they force companies to cover security fundamentals and regularly reevaluate their IT risk programs and carrier’s policy changes to ensure adequate coverage, as insurance is not a panacea for a weak or inconsistent security programme.
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It's safe to say that in the coming year, insurance and legislation will drive mass adoption on fundamental security practices for finance firms and teams. However, given the particular data pressures they face, financial services will be faced with a balancing act of meeting insurance criteria as well as complying with the regulatory standards themselves. While this may throw up some data management challenges, in the long run, it will certainly prove beneficial in helping financial services improve their cyber security posture.
Whether you are a new startup or you are an established business in your niche, taking the right approach to your small business accounting is crucial for the success of your enterprise moving forward. With the right financial data at your disposal, you can make better-informed decisions about the future of your business, assess your performance and adapt to changing trends with ease.
Failing to maintain proper financial records can cause your business all sorts of problems down the line. From delaying the receipt of payments to cash flow problems and issues with filing your taxes, poor financial management can quickly spell disaster for small businesses. To ensure that you stay in control of your business finances, it’s important that you adopt the right accounting habits this year to set your small business up for success in 2021.
Let’s take a closer look at five accounting habits you should adopt in 2021 to help you to stay in control of your business finances.
One of the most important accounting habits that any business owner can adopt is keeping good records. Keeping meticulous records will ensure that you keep track of all of your income expenses, that you get paid on time and that you have the financial information you need when reporting time rolls around. Having access to up-to-date and accurate financial data will also allow you to make better-informed business decisions going forward.
Business owners wear many hats, contributing to many aspects of the business. When it comes to managing your finances, you need to ensure that you have the right advice to help you keep your business on track. Seeking out professional financial advice will help you to gain a better understanding of your accounts and implement systems that will help you to manage your finances more efficiently.
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Modern cloud-based accounting programs can help you to manage your business accounts and meet your reporting obligations with ease. These powerful accounting solutions are capable of automating many of your financial recording and reporting tasks, giving you more time to focus on the daily tasks associated with running your business. Choosing the right accounting software to meet the needs of your business will allow you to manage your business accounting with more precision and confidence.
As a business owner, you need to ensure that you meet your tax reporting obligations to the ATO. At the beginning of the financial year, be sure to enter all of your report due dates into a calendar or other organiser so you know what reports are required and when they are due. Taking an organised approach towards your business tax reporting obligations will ensure that you avoid incurring any penalties or fines which could hinder your business at tax time.
Having a clear understanding of your business expenses is essential in planning for the future needs of your business. Being able to identify where you are overspending or where you are investing with little return will help you to make changes as required. Whether you will need to reduce your spending, seek financing or generate more income, monitoring your expenses closely is key in maintaining your profitability and having adequate cash flow to allow you to operate optimally.
Managing your business finances is a constant struggle for many business owners. With a new year beginning, now is the time to reassess your accounting habits and make positive changes going forward. Take the right approach to your business accounting in 2021 and adopt new accounting habits that will allow you to stay in control of your business finances and on track toward your financial targets.
Today, you can use video conferencing software and project management tools to facilitate coordination and communication in a team that’s spread across multiple locations. Consequently, a global workforce is gradually becoming the norm for companies, irrespective of their size and niche.
This isn’t surprising considering the awesome benefits that global recruitment and remote work offer. To begin with, it introduces cultural diversity and multiple perspectives in your team. This can go a long way to encourage innovative thinking and creative problem-solving among your employees.
It’s crucial when you want to break into new markets and expand your business internationally. Also, when your employees work remotely from the comfort of their homes, it can increase their productivity and efficiency. Recruiting employees in certain countries can even be more economical than hiring from your home country.
Having said that, building a global workforce comes with its own set of obstacles. From managing multiple time zones to ensuring complete transparency - you need to overcome various hurdles.
However, the biggest challenge of recruiting employees across the globe is managing payroll. From compliance issues to payment delays - you’re likely going to face various problems while paying international employees.
In this article, we’ll discuss some of the most common challenges you’ll have to overcome to pay employees overseas. But let’s first take a closer look at the different employment models you can use to build a global workforce.
Typically, if you’re looking to recruit international employees, you’ll likely use one of the following employment models:
This is a common choice for small and mid-sized businesses. Instead of recruiting full-time employees, you hire freelancers on a contractual basis. It saves you the trouble of providing any benefits, bonuses, and other incentives. When hiring contractors though it’s important that they are contractors to avoid the risk of misclassification.
From compliance issues to payment delays - you’re likely going to face various problems while paying international employees.
In this model, you recruit part-time or full-time employees from a foreign country and make them a part of your global payroll. This requires you to keep a tab on the taxes and labor laws in their host country. You will also have to establish a legal entity in the host country before you can directly recruit international employees. This is known as the global payroll model, to distinguish it from the contractor and global PEO models even though all 3 global workforce models require paying and a ‘payroll’ to your overseas hires.
The global PEO or professional employer organisation model allows a company to use a professional services company to hire and become the employer of record for the employee in the overseas country. The global PEO is responsible for handling all employee-related responsibilities, including payroll processing, tax management, benefits management, etc. Recruiting through a global PEO simplifies the overseas talent acquisition and onboarding process enabling you to hire overseas without having to first open a local entity.
Unless you have partnered with a global PEO who will undertake the payroll and ensure that your employees’ salaries are in accordance with local payroll taxes, you’ll have to manage payroll for your international employees. Even if you have recruited freelancers, you will still need to ensure that they’re paid the right amount at the right time.
Here are a few common challenges you’ll encounter when paying employees overseas:
Every company has its own set of labour laws and tax legislation. Even if you’re establishing a legal entity in a foreign country, you’ll need an expert to guide you through the local laws.
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If you fail to adhere to these regulations, your company might be liable for financial penalties. That’s why compliance is the most common problem you’ll experience when paying international employees. This can become particularly challenging when you need to keep a track of multiple laws across various jurisdictions.
Hiring independent contractors doesn’t exempt you from the purview of compliance. This is because if you exclusively work with a freelancer for a long period, it could potentially make them look like full-time employees in the eyes of the local jurisdiction.
If you’re working with many contractual employees across the globe, they’re likely going to follow diverse payroll calendars. Monitoring these calendars and making manual payments in a timely manner can be excruciatingly difficult.
Also, when you’re paying employees in different countries, you need to account for various processing delays. While in some countries, the bank processing time is only a few hours, others can take days or weeks to complete a transaction.
You need to factor in these delays in your payroll calendar to ensure that your employees get paid on time, irrespective of where they’re located.
Wiring money to different countries isn’t the same as making a bank transfer in your home country. You need to consider various factors, including the currency exchange rate and processing fees.
Manually tracking these details on a regular basis is going to be challenging. Also, depending on the number of overseas employees, you might end up spending a lot of money on processing fees.
Wiring money to different countries isn’t the same as making a bank transfer in your home country.
If you’ve had any experience in hiring and paying overseas employees, you’re likely be already familiar with the concepts explained here. For those taking their first steps in hiring abroad, this post should give you an idea about some of the complexities involved.
What steps is your company taking to simplify the process of paying overseas employees? Share your tips in the comments section below.