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The 'data era' is revealing gaps in financial compliance technology

Yaron Hazan (yarok02@yahoo.com) is VP of Regulatory Affairs at ThetaRay in Hod HaSharon, Israel.

Research shows that the use of technology in the business sector has two main purposes: (1) improving the efficiency of successful current processes by automation and (2) replacing or totally changing the methods used to significantly improve the performance of a process. Creation of such technology is also known as disruptive innovation (i.e., the introduction of a new method unlike old practices or a new product type). A well-known example for such evolvement is the way we consume music: vinyl albums and cassette tapes evolved to CDs, which then evolved to MP3s, and then to streaming on YouTube or music apps.

In this article I will discuss the role of technology in compliance and its evolvement, since it plays a significant role in compliance-related activities. Its role will continue to grow due to the following trends:

  • Large institutions are enlarging the size of data they own and manage, giving way to what has become known as the “data era.”

  • Human interaction is decreasing, and more interactions are completed electronically.

  • Products and services, current and new, are being offered in an electronic channel.

  • COVID-19 is affecting the way we consume products and services.

I will focus on the financial industry for two main reasons:

  1. It has been heavily regulated for decades, so it provides enough facts to support ideas and assumptions from a research perspective.

  2. It also has gone through dramatic changes that influence other industries regarding how compliance programs are designed and executed.

Additionally, I will specifically focus on financial crime compliance (FCC), which covers anti-money laundering, counterterrorist financing, sanctions, anti-bribery, and corruption.

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