Technology in the accountancy and legal sectors – what are the regulators doing? The long read…
In our final piece, we turn our attention to the future, to provide some new perspectives. With our future-gazing lenses in place, we address the question: Will technology move from being a useful tool, enabling businesses to stay ahead of the curve and their competitors, to being a necessary tool, required to ensure businesses comply with their regulatory obligations and duties?
There’s no doubt that the use of technology and the appetite for technological innovation in the legal and accountancy sectors are progressing at a remarkable rate. More businesses are realising the benefits to be gained from new technologies, leading them to push the boundaries ever further. We’re talking about working more efficiently, more productively, and having the capability to deliver more competitive and innovative solutions to clients - it just makes good business sense.
The demand for technology and innovation among legal and accountancy professionals has been matched by their regulators and professional bodies placing these areas firmly on their strategic agendas . Coupled with this, more tech start-ups are entering the market, tailoring their products specifically to the needs of the legal and accountancy sectors. Yet despite this movement, the feeling remains that technology and innovation is still in its ‘nice to have’ phase – yes, it makes good business sense, and for some, it’s becoming viewed as a ‘need to have’ from a commercial perspective to stay ahead of the competition. But while we’re not quite there in terms of technology being considered an outright necessity, we may not be far off.
Along with FinTech and LawTech, you might have also come across another term called RegTech. These terms are more than just buzzwords; they are in fact quite distinct movements that are impacting both the legal and financial services sectors. Regulatory technology or RegTech is the term to describe new technologies which aim to innovate and create new mechanisms for how regulated businesses operate from a regulatory perspective.
In 2016, the Financial Conduct Authority (FCA) was the first UK regulator to support the term RegTech, which it describes on its dedicated RegTech webpage as applying to “new technologies developed to help overcome regulatory challenges in financial services”.
So what do these technologies cover? Looking to the financial services sector, one example concerns how businesses operating in the banking sector discharge their regulatory reporting obligations. In 2018, the FCA and the Bank of England launched their Digital Regulatory Reporting project, which aims to improve the timeliness and quality of information that firms must provide to the FCA as part of its supervisory process. The project is currently in phase 3, which will put in place changes in how the FCA will require regulatory reports and data to be delivered to them in the future.
We can already see, therefore, particularly in relation to financial services, how the use of technology is shifting, from being a useful strategy adopted by the commercially savvy, to an approach which will very much be a necessity from a regulatory perspective; in this case, ensuring FCA regulated firms adequately comply with their reporting obligations. While we haven’t yet seen similar initiatives being considered by the legal and accountancy regulators, there is every possibility that we aren’t very far off this new era of regulatory compliance.
Aside from reporting obligations, other regulatory processes which may be transformed by technology, and which are likely to be on the regulators’ radars, are those which enhance firms’ timeliness and effectiveness of anti-money laundering (AML) and due diligence or ‘know your client’ checks. Earlier this year IBM announced its growing focus in this area of regulatory compliance, in order to “help financial institutions improve alert triage and investigative efficiencies”. New technologies are also appearing on the market to enhance compliance with data privacy and information security, both of which are among the top priorities for all regulated businesses regardless of sector.
For the moment at least, we are merely gazing into a future where technology is a necessity in order for firms to comply with their regulatory obligations; however, we predict this reality to be much closer than a distant possibility. With technological developments progressing at the rate at which we are seeing, this is the ideal time for firms to start their preparations in anticipation of, and readiness for, when their regulators will require them to take a forward-thinking approach. With this in mind, and to conclude this tech blog series, we set out below our three takeaway practical steps for law and accountancy firms:
If you have any questions or concerns about the content covered in this blog, please contact a member of the Regulatory team.
Sarah is a partner in the Regulatory Team. She works with a number of clients across sectors to provide legal and process advice, to include the most effective harnessing of technology in the Legal Sector. She is Lean Six Sigma (Green Belt) qualified.
Lucinda is a professional support lawyer in the Regulatory team, and is responsible for knowledge management and practice development.She has previously advised individuals and professional bodies in the legal and accountancy sectors, on authorisations, compliance, ethics, and regulatory policy.
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