Transforming Work With Documentation For Banks: Why Is It Crucial Today

Evgeny Likhoded, CEO & Founder, ClauseMatch

Evgeny Likhoded, CEO & Founder, ClauseMatch

Why are the bankers losing sleep

A top-tier bank generates between 2 and 5 million documents a year. Just imagine how many hours it takes to handle that volume of documentation. According to recent research by Thomson Reuters, more than a third of financial firms continue to spend at least a whole day every week tracking and analysing regulatory change. We spend 13.5 hours a week searching through email attachments alone. Working on complex documentation such as contracts with many stakeholders in large financial institutions is a fragmented, messy, repetitive process. Document authoring, review and approval takes time and effort, relying on multiple versions of Word documents and long e-mail threads where vital data like comments and approvals can be buried.

A more important point is how much risk is stored in these documents. These are documents that outline bank's controls, policies, procedures, contracts. Not all of these risks are obvious or transparent. When large, globally distributed teams within companies work on the same documents without a single solution, it can muddy that waters, and further data extraction and dynamic searches inside the final documents may be limited. All of this is a potential minefield for risk and human error. With physical documentation we don't have an audit trail on how the content within these documents was created and approved. Regulators want to see that data.

With our document-sharing platform, they can. We address the problem of transparency, helping banks to get visibility back to shed millions of hours from creating those documents in a nice and simple interface in one single platform, which is collaborative and real-time. Until now, there has been no all-encompassing solution to streamline complex workflows, saving time and resources, removing human errors, uncovering hidden risks and providing better insight for senior management. Through ClauseMatch, global teams within banks tasked with monitoring regulations and updating internal frameworks, policies and standards now have a single platform to manage the lifecycle of these documents.

Every day in the newspapers there’s a story about new or evolving regulation which banks must comply with. More and more regulators are asking banks to provide visibility into risk and internal controls, against the regulation that applies to them. This increased regulation brings with it potentially heavy fines. No wonder bosses in banks are losing sleep. Rising to this challenge is the number one priority for the majority of the CEOs in top banks in the world.

Specific application of this document management platform for the UK

Right now financial regulation in the UK is in a state of uncertainty and transition. Brexit and the impending MiFID II are forcing firms to re-evaluate their approaches to compliance, reporting and critical risk.

Changes in regulations are reflected in massive changes in documentation. We at ClauseMatch are even more fortunate to see it from the inside and take an active role in addressing these challenges

Managing the process of new contract negotiations combined with remediating and repapering hundreds of thousands of existing contracts for the changes implied by Brexit is daunting – to say the least. The costs and obvious inefficiency of manually managing a bank’s compliance could be punitive. For some companies it may prove impossible. Our intuitive smart document platform is not only a tool for proving compliance, it streamlines complex workflows, saves time and resources, removes human errors, uncover hidden risks and provides better insight for senior management. It is the solution to the current exponential increases in regulation.

The FCA and their initiatives

Regulation is evolving at breakneck speed and we have to keep pace. I believe that FCA is one of the most innovative regulators in the world. For example, last autumn (November 2016) we took part in the FCA tech sprint, a two-day hackathon to provide startups a platform to build solutions in regulatory space which would be helpful for FinTech firms, regulated firms, but also large banks. During that FCA sprint the FCA were completely collaborative. They even brought in partners, to create real solutions for the market.

At the FCA TechSprint, during a thirty six hour of intensive brainstorming battle [with JWG, the well-known regulatory think-tank], we developed a combined solution which ‘unlocks’ regulatory changes and helps with implementation of regulation for global firms. ClauseMatch provided our award-winning API-driven innovative content platform software as the basis for integrating the data management solution provided by JWG. In the course of just two days we successfully combined sections of the FCA Handbook directly with internal documents that deal with those sections based on regulatory taxonomy developed by JWG, to provide real-time monitoring of regulation and internal processes. The new platform solves the issues of compliance process that financial regulators and firms currently face. It makes complicated compliance process simple, flexible and efficient. The team received honourable mentions in two categories. We also managed to pioneer one of the solutions, specifically for regulated firms which should allow a better compliance with regulation. The FCA has proven that it is interested in exploring technology solutions that can help simplify the compliance process for banks and new entrants to financial services markets. Regulators are taking innovation seriously. Banks should take it seriously, too.

RegTech and Blockchain

It’s time for RegTech, or the so-called FinTech 2.0. Regulatory technology is already helping banks in automating internal policy management, an essential first step to further automate compliance within a bank. This spring ClauseMatch announced the launch of our policy management project at Barclays, integrating the innovative document management platform with the bank’s internal system. ClauseMatch works as a browser-based real-time collaborative document management platform containing in its core a detailed workflow where comments, approvals and changes are a part of a full audit trail. The platform provides total control and visibility of content with unprecedented reporting capabilities. Hundreds of employees have successfully on-boarded the ClauseMatch platform and more join every day. By offering the additional features that allow the connection between regulatory changes and internal policies for impact assessment and risk mitigation ClauseMatch addresses regulatory challenges as well. A successful graduate of Barclays Accelerator programme back in 2014, ClauseMatch is now also actively working with the bank to apply the same solution to further streamline compliance.

Important innovations in the financial sector banks should be aware of

Finance companies have started exploring the innovative technology of blockchain to understand if it can reduce the time required to onboard new customers by automating and sharing KYC checks on companies, retail customers, employees in a transparent and safe way. It is the most cost-effective way to remove duplication of effort that each bank goes through when onboarding the same customer for a financial product. When RegTech is combined with the blockchain it can reduce the risk of fraud and money laundering, which can cause huge losses and regulatory fines. Integration of blockchain technology into FinTech and RegTech could cut operational costs up to 30 percent, saving major financial institutions up to 8 billion a year. I believe we are at the beginning of a new era for compliance, and ClauseMatch is constantly evolving to meet these new challenges.