From Crypto to ESG, FinTech and DLT: 2023 in finance will be the year of compliance


More financial legislation means more compliance - and therefore more RegTech

We are living in times increasingly marked by uncertainty. Even in Europe, where economic and social stability had not been in crisis in decades. Just think of the Covid-19 pandemic, the environmental crisis, the war in Ukraine and its consequences on the energy market. But not only that. Also the protests against regimes erupted around the world - from Iran to China, from Peru to Russia. In this highly unstable context, however, there is at least one certainty about the future: 2023 in finance will be the year of regulation - and compliance. Yes, because the continuous and rapid technological, social and environmental changes require an effort by regulators to ensure that innovation takes place within a regulatory framework that protects all parties involved. Focusing on the financial sector, the regulatory challenges to be faced are many and decisive - as we will see. And, in such a context, an increasing legislation will lead to an increasingly central role for financial compliance. Therefore also to the growing need for RegTech solutions that can automate compliance processes in all those steps where humans do not add value. Just as Daitomic, our RegTech SaaS, does.

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Crypto, ESG, FinTech, DLT... 2023 will be the year of regulations

As we wrote a few lines ago, the financial sector's regulatory challenges for 2023 are many and crucial. Without aiming to be exhaustive, we wanted to collect the most important ones. Or at least the most recent ones, since they concern the areas that regulators themselves wanted to highlight in the early days of the new year that has just begun.

  • ESG issues - At the Italian level, in the very last days of 2022 the Bank of Italy published a document on ESG (Environment, Society and Government) factors for Italian banks, confirming the increasing attention of financial regulators on ESG issues, with respect to which the ECB and national supervisors have launched various initiatives for the near future.
  • DLT Market Infrastructures - At the European level, the ESMA focused instead on DLT MI, publishing guidelines on applications to operate Market Infrastructures (Market Infrastructures) based on Distributed Ledger Technology and encouraging companies to anticipate the entry into force of the guidelines (scheduled for 23 March 2023) and to contact the relevant national authorities to get support in this activity.
  • Regulamentation of Crypto and FinTech - As we note in another post devoted to the topic, the regulation of cryptocurrencies and the FinTech market is also an increasingly important issue for financial regulators, as evidenced by the fact that the Group of Governors of Central Banks and Heads of Supervision - the so-called GHOS -, the oversight body of the Basel Committee on Banking Supervision approved a final prudential standard on banks' cryptocurrency exposures on December 16, in addition to the Basel Committee's program for 2023-24, which focuses on identifying and assessing emerging risks and vulnerabilities in the global banking system, particularly with respect to the digitization of finance and financial risks related to the climate crisis.
  • Regulatory updates on PRIIPS - In the last days of 2022, precisely on December 29, the Resolution N. 22551 of 21 December 2022, was then published in the Official Gazette, whereby Consob approved the latest amendments to the Issuers' Regulations, which stipulate that the so-called KID (Key Information Document) on financial products will be provided to all retail investors of investment funds, thus extending it, from 1 January 2023 to all investment funds, that is, to all types of PRIIPS (Packaged Retail and Insurance-based Investment Products) - the hybrid financial products of a financial-insurance nature, aimed at retail customers.

How to overcome regulatory challenges? By optimizing financial compliance processes

In short, a real series of regulatory challenges, issued by European and Italian regulators to financial institutions for 2023. Challenges that do not end with this list. But how can this need for accurate and real-time regulatory updates be addressed? How can compliance activities become faster and more reliable? The answer may seem obvious: by introducing automation into financial compliance processes. Sure. But how to do it in a way that truly brings accuracy and efficiency, and not rather confusion? Through a long and careful analysis of the banking industry, at Aptus.AI we have identified the steps in compliance processes that can be automated, namely those of so-called regulatory alerting. This process consists of the collection and analysis of regulatory updates, aimed at assessing their relevance to the individual financial institution and the possible need to proceed with a risk assessment. And our SaaS designed for the RegTech market, Daitomic, is already able to automate all these steps of compliance processes, automatically extracting regulatory obligations and thus preparing a first-impact analysis, which also takes into account internal processes and policies, to answer the needs generated by an ever-changing regulatory framework such as the one just described.

Turning compliance into a competitive advantage is possible, with Daitomic

But not only that. The increasingly central role of compliance in banking can and should also be leveraged by financial institutions to gain a competitive advantage from it. Yes, because the proprietary AI technologies underlying Daitomic transform legal documents into a standard machine readable format and analyze them through Artificial Intelligence with a holistic - supporting all regulatory domains - and multilingual approach - supporting all European Union languages. In a cross-regulatory and cross-country context, this technology therefore enables not only the reduction of time and costs for the transposition of financial regulatory updates, but also the analysis of the documents under discussion, offering for the first time the possibility to anticipate regulatory trends, therefore to develop proactive compliance strategies that support business.