The OECD Global Blockchain Policy Centre has recently invited Cognitive view to showcase its distributed ledger technology addressing public policy issues.
Cognitive view analyzes customer communication data to automate compliance, customer experience and conduct risk monitoring. It’s Regtech essentially helps firms improve consumer fairness, public trust in our financial services and enhance market integrity.
Continuous monitoring & reporting automation using Blockchain
Most organizations spend a great deal of time and energy wrestling dirty, poorly integrated data. They either cannot find the correct data or cannot trust the information they find. On top of that, they must deal with multiple industry regulations that are barriers to self-service and data democratization. As a result, they try to fix their data through various labour-intensive tasks, from writing custom programs to global replace functions – overall diminishing their productivity as data analysts and data scientists.
The opportunity is for regulated entities in continuous control monitoring and regulatory reporting that is much more efficient addresses the data quality issues and substantially reduces operational and non-financial risk. We believe technology has advanced enough and brought us to a stage that we can think beyond the boundaries and make regulatory compliance more efficient, cost-effective, and shift the paradigm.
Cognitive View generates a lot of data in real-time with its continuous control monitoring technology and analysis of unstructured data. Hence the opportunity to enable continuous monitoring and reporting with the right foundation.
We have introduced a private blockchain-based foundation that addresses some of the pressing needs of regulated entities in internal auditing & regulatory reporting. Blockchain-based audit/reporting is a new and still an optional feature; for regulated entities, provide the below capabilities when enabled.
Cognitive View monitors on a real-time basis for any compliance failures and generates incidents and breaches. All the breach information is written to an internal private blockchain. A smart contract is a digital contract that can self-execute automatically will create an alert when breach conditions are met.
Risk and compliance officer assesses the breach and decides to report to the regulator if meets significant breach reporting criteria. The transformative technology that enables a shift in the focus of compliance staff from information gatherers to information analysers. It is time for a paradigm shift in the financial services industry and the way regulatory compliance departments operate.
A private blockchain will allow regulated entities to
- Standardize the internal data reporting requirements
- Improve information flows between 3-lines of defence that is auditable & transparent
- 1LOD automation to ensure material risks/issues logged, prioritized, and then escalated. Addresses many of the data quality issues
- Detect & prevent instances of fraud and misconduct from occurring in the first place
- Trace obligations from frontline oversight through to Executive and then Board reporting
Regulators play a vital role in considering new policies, frameworks, standardization efforts, and ownership models for better industry adoption. Regulator publishes new regulations and assesses reports of significant breaches from the regulated entities. So any automation that does not include the regulator is incomplete. Regulator and regulated entity collaboration are absolutely critical in reducing the cost of compliance.
The future operational model and opportunities in a blockchain-based collaboration consortium
A hybrid blockchain framework can enable a consortium model. The regulated entities will have their own private Blockchain and will be able to join with the regulator’s public Blockchain based on regulatory engagement requirements and approval.
Firms will, for example, be able to measure their level of compliance in real-time, as will regulators. Indeed, as organizations within the financial sector become more technology-driven, this approach makes increasing sense – financial services organizations are already, in many senses, largely IT environments.
What are the Role Regtech or Suptech’s play in such collaboration and blockchain-based consortium?
Many mid-sized and smaller firms do not have resources and skills to build, whereas large firms may decide to build their own in-house technology solution. Regtech and Suptech will play a vital role in the consortium and technology adoption by regulated entities. Below diagram some of the key roles the Regtech and Suptech plays.
The Australian government has recently started a new set of measures for Deregulation with a laser focus on reducing the regulatory compliance burden on business. The measures are to reduce red tape, making it easier for businesses to invest, create jobs and grow the economy. The Deregulation Taskforce is also working on opportunities to adopt technological or ‘regtech’ solutions which make it easier for business to cost-effectively navigate and comply with regulatory requirements. The de-regulation does not necessarily have to be fewer regulations, rather increasing automation and operational efficiency will drive increasing de-regulation in all sectors.
Please reach out to firstname.lastname@example.org, for all the forward-looking organizations who are ready to participate and collaborate in this area.