Ensuring Efficient Regulatory and Tax Compliance Processes

By Michael Henry, Principal, Advisory, KPMG LLP

Michael Henry, Principal, Advisory, KPMG LLP

Financial institutions are overwhelmed by the data they must manage in order to comply with increasing regulatory requirements. As such, the financial firms are looking for a more accurate and efficient regulatory and tax compliance process. Relying on increasing numbers of people to perform these functions has become untenable. Companies need to blend data technology and intelligent systems to improve efficiency and speed to comply with these regulations and remain competitive.

“Financial firms are looking for a more accurate and efficient regulatory and tax compliance solution to meet regulatory demands”

Breaching regulations such as Anti-Money Laundering (AML), Know Your Client (KYC), Foreign Account Tax Compliance Act (FATCA) and Markets in Financial Instruments Directive (MiFID II), can result in multi-billion-dollar fines, damaging corporate reputations and significantly increasing credibility risks. In the past 10 years, more than a dozen major banks have been fined in excess of $10 billion after being cited for violations of KYC and AML laws, and the instances of violations and resulting sanctions grow every month. Fear of potential multi-billion-dollar fines also discourages institutions from engaging in new business.

Client satisfaction and retention also drive banks to new solutions. Current manual processes that are time consuming, costly and error-prone can damage the customer experience and hurt customer retention. According to KPMG research and published reports, 89 percent of customers switched to a new company when they had a bad experience with their previous organization. In addition, only a five percent reduction in the customer defection rate can increase profits up to 95 percent.

KPMG has created the next generation solution for increasing the speed and accuracy of the process to sift through mounds of data necessary for regulatory reporting and other tasks. This technology platform is capable of ingesting petabytes of data across the enterprise into an advanced non-structured query logic database, and then intelligently extracting reference data in context from the unstructured data. Through this platform, KPMG professionals can assist organizations to model their policies for complying with regulations using metadata. The platform identifies discrepancies from the data, allowing human beings to focus only on exceptions.  The technology-based solution createsan electronic audit trail for internal audit purposes and for review by external regulators which can be evidenced in reports and dashboards included in the technology.

The first component of KPMG’s technology-based solution is an advanced policy engine that takes into consideration requirements defined by the client, determines documentary evidence required and controls risk scoring. A second engine ingests unstructured data into mainstream computing through algorithmic reasoning. Together these engines drive substantial automation, while human operators manage the most difficult cases or exceptions where the platform needs human judgment.

The use of this technology-based solution can produce more accurate and traceable results, while also reducing the time required for compliance related matters. An analyst working with the platform can process 20 to 30 accounts in an hour, compared to the manual process requiring 1-2 hours per account. KPMG is working with more than 15 financial services institutions to help them transform their regulatory reporting process through automation.

KPMG welcomes the opportunity to meet organizations interested in evaluating and potentially automating their regulatory and tax compliance process, striving to reduce errors and enhance the overall customer experience. 

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