RegTech is the management of regulatory processes within the financial industry through technology. The main functions of RegTech include regulatory monitoring, reporting and compliance. Today, Fazzaco invites Remonda Kirketerp-Moller, Founder & CEO of RegTech firm, Muinmos to share her views on RegTech solutions and the influence of tightening regulation from ESMA, ASIC and other regulators on forex brokers.

Fazzaco: Please give a brief introduction about you and Muinmos.

Remonda: I am a qualified solicitor and RegTech entrepreneur, with a specialism in regulatory matters in financial services. I worked in the retail FX sector for many years prior to setting up Muinmos ApS. I was a co-founder of CFH (now Finalto) and spent over a decade in senior executive positions at Saxo Bank and CFH where I gained first-hand experience about the complexities involved in compliance and onboarding across many jurisdictions.

Having spotted a gap in the market to use technology to automate highly complex legal and regulatory challenges in financial services, specifically in global client onboarding, I left CFH in 2012 to set up Muinmos, a Danish RegTech firm.

At Muinmos, we have developed an AI-based proprietary regulatory compliance engine which delivers instant automated onboarding of any client type in under 3 minutes and ensures regulatory compliance throughout the client’s lifecycle with the financial institution.

Our technology is unique and provides financial institutions with instant clearances on whether they can onboard or keep a client in any country and whether they can offer a given service and financial instrument to the client in any given country whilst clearing all the KYC/KYB requirements.

Ultimately, we have simplified and enhanced the compliance process for financial institutions operating across multiple jurisdictions – and our clients worldwide are reaping the benefits of using it, safe in the knowledge that, against a backdrop of increasing and complex regulation, they are always compliant.

Fazzaco: Congratulations! Muinmos has been shortlisted as Best AI Solution for Regulatory Compliance in the 2021. What major developments has Muinmos seen in 2020?

Remonda: We are thrilled to have been shortlisted by a panel of experts for the RegTech Insight Awards as Best AI Solution for Regulatory Compliance. It is a real testament to the outstanding capabilities of our product, which maps thousands of regulatory parameters, legislation, permissions, rules and guidelines from around the world and is powered by advanced algorithmic rule-based Artificial Intelligence (AI) and robotic automation.

2020 was a great year for Muinmos – with a number of key developments. We launched our engine in Chinese as part of our strategy to grow in Asia and we entered the US market. We were also selected for the prestigious RegTech 100 for the fourth consecutive year.

As part of our sales strategy, we segregated our solution into three modules to give greater flexibility to clients – and this resulted in a significant increase in client acquisition. All three modules together provide financial institutions with a complete compliance solution. However, some clients may just need functionality from one or two of our modules, and these can be easily integrated into their existing technology. Our modules are:

mPASS™ – for full financial product and services – instantly and globally validates whether a financial institution can onboard a client to trade with it in a particular service/product/country.

mCHECK™ – for AML clearances – conducts all relevant KYC/KYB checks.

mRX™ – provides financial institutions with an instant risk scoring report on their underlying clients based on the financial institution’s pre-set risk parameters.

Fazzaco: What role does the RegTech solutions play in the forex sector?

Remonda: RegTech solutions streamline compliance processes, increase efficiencies, lower operational costs and reduce risks. These are key in the forex sector, where regulatory compliance due to ESMA, MiFID II etc. is extremely complex. In this sector, technology can play a major role in helping the compliance function to adhere to all requirements and mitigate the risk of mis-selling and fines.

When I founded Muinmos, the RegTech sector wasn’t really recognised. Brokers didn’t seek out RegTech solutions as they didn’t know they even existed. As RegTech has gained momentum in the last few years, our business has really benefited. There is an acceptance now amongst forex brokers and other financial institutions that automated systems can transform the compliance function and truly open up new business opportunities for them, giving them a significant competitive edge.

Fazzaco: With the tightening regulation from ESMA, ASIC and other regulators, what are their influence on RegTech solutions? How about your company business development under this?

Remonda: The tightening regulation has resulted in an increased need for RegTech solutions such as our proprietary Regulatory Compliance Engine. The reality is that no firms just operate locally and, as such, they need to comply with the regulations in all the countries in which they are onboarding clients from. If financial institutions had to keep up-to-date with regulation within one jurisdiction, that may be manageable. However, with cross border business in multiple countries, the situation is impossible to manage manually without RegTech solutions to automate the process. Due to the volume of information, complexities and ongoing updates from regulators, hefty fines and risk of having transactions reversed for non-compliance are highly likely for firms who don’t used RegTech solutions to automate their onboarding process.

At Muinmos we constantly review the guidelines from ESMA, the FCA, ASIC etc. and these are all accounted for in our product modules. We fully support the MiFID II client categorisation obligations as this Directive has been implemented by each Member State and as mandated by ESMA. We have always been adamant that correct classification and categorisation of clients from the outset is critical to also ensure that the products and services offered to the clients meet the regulatory obligations under the suitability and / or appropriateness framework as well as any prevailing financial product restrictions worldwide. This is why we have invested so much time and money in developing a solution which focuses on this. If the categorisation is wrong, then the assessment of whether to enable the client to trade a financial product in a particular financial service and country will also be wrong, leaving the financial institution at risk of mis-selling.

It is worth noting that we work closely with regulators as well as with financial institutions. Our mPASS™ product is used by a number of regulators in their Sandboxes, including the UK FCA, Danish DFSA and Cyprus CySEC, to help identify discrepancies and to cleanse data and rules sets.

Fazzaco: As a compliance specialist, what advice would you give forex brokers to help with meeting these regulatory changes?

Regulated forex brokers are operating in an environment where there is a real risk of fines and reversal of trades for mis-selling – even if they have done so inadvertently, perhaps by categorising a client incorrectly from the outset. It is impossible for a forex broker to meet their regulatory requirements, especially cross-border, without embracing RegTech solutions. I would advise them to identify areas across the compliance function which are laborious, inefficient, costly or prone to human error, and then demo different products available which can help to address these issues.

Fazzaco: You mentioned in your blog that the biggest challenge in compliance in 2021 is educating compliance teams, could you give a specific example?

Remonda: I think this is a challenge. From what we’re seeing, despite the clear benefits of RegTech solutions, many lawyers and compliance officers are still using manual processes or excel spreadsheets to keep track of changing regulatory requirements. Some are reluctant to embrace RegTech solutions as they fear that the use of automated systems may result in them losing their job. The very opposite is true – they will be able to do their job far more efficiently and their time will be freed up to focus on the more interesting aspects of their role. Thousands of analysts at financial institutions are spending their time searching the internet for regulatory updates. These analysts should be analysts instead of data processors.

Using RegTech technology involves a new way of working and for some firms, embracing new ways of working can appear to be daunting. However, these solutions have been designed specifically to analyse large amounts of data and enable compliance teams to make more informed, timely and accurate decisions.

Interestingly, ESMA recently suggested that the compliance function should be given their own technology budget. I am not sure how widely this has been adopted yet – but the thinking behind it from ESMA is clear. Technology such as RegTech solutions can play a major role in enhancing and streamlining the compliance function and assisting in safeguarding the stability of the financial system and ultimately protection of investors, and should be welcomed by compliance teams within financial institutions of all sizes.

Fazzaco: What does the future of regulatory compliance look like?

Remonda: I believe strongly that RegTechs will get regulated, giving further reassurance to financial institutions wishing to outsource relevant parts of their compliance needs to RegTechs. This will result in in-house compliance departments focusing on core aspects of the business, with RegTech systems as the backbone of their departments, ensuring fast, compliant and efficient systems are in place 24×7.

Fazzaco: As Muinmos has demonstrated, AI or other automated methods have been introduced to the compliance function. What are the advantages and disadvantage of such automated methods compared with manual compliance process?

Remonda: I can’t think of any disadvantages but the advantages are clear. AI/automated solutions can dramatically speed up processes and provide far greater accuracy, removing the element of human error, provide greater transparency and fully empower the financial institution.

Fazzaco: What are the next steps for Muinmos?

Remonda: We continually invest in product development and maintain our innovative spirit in order to remain a market leader in regulatory compliance in client onboarding for financial institutions. In terms of our immediate plans, we are looking to grow our team, extend our partnerships and maintain our focus on growing a global client base, offering exceptional service, speeding up onboarding and ensuring our clients remain compliant from the onboarding stage and beyond.

Originally published on Fazzaco.