Month: August 2024

RegTech or LegalTech, do you know the difference between these technological solutions? e-Reg is a RegTech platform, although it can also be considered a LegalTech. In this article, we explain the missions of these two types of company and the profile of their users. We also explain the features of e-Reg that enable it to be classified in both categories, but above all as RegTech.

1 – What is a LegalTech company?

The concept of LegalTech emerged in the United States and the United Kingdom in the 2000s. It occurs alongside numerous technological developments in the digital field, data processing and artificial intelligence.

1.1 – Definition and history of LegalTech technology

The concept of LegalTech is still relatively new in the world, which is not surprising given the youth of the technologies used.

1.1.1 – What does LegalTech mean?

The term LegalTech is a contraction of legal technology. Wikipedia provides a definition based on the ethical charter for an online legal market and its contributors, an organisation that brings together a large number of legal professionals.

Furthermore, a LegalTech uses technology “to develop, offer or provide products or services relating to law and justice, or to provide access to such products or services for users of the law, whether professionals or not”.

1.1.2 – Technologies for legal efficiency and cost reduction

They are sometimes referred to as “legal start-ups”, LegalTech companies have been in existence mainly since the last decade. These are innovative companies that use technology, including digital technology, to provide digitalized and often automated legal services.

Through the use of these new techniques, a LegalTech makes it possible to reduce the processing of a wide range of legal activities (contract creation, legal monitoring, dispute resolution, etc.). Algorithms analyse the data provided on online forms filled in by Internet users. In this way, they adapt the drafting of a contract or, for instance, insert the essential legal clauses.

1.2 – Missions of LegalTech companies: improving legal practice

These start-ups use technological innovation in the legal field. They offer services in SaaS mode for :

• prepare company articles of association online ;
• carrying out legal formalities for the creation or modification of a company;
• draw up contracts in all areas of law ;
• resolve disputes (automated demand letters or services offered by online agents) ;
• carry out searches in different databases ;
• simplify the management of a law firm by automating certain tasks ;
• facilitate regulatory monitoring by producing guides or thematic fact sheets to help web users, etc.

On 13/02/2023, Le Nouvel Économiste published an article entitled “LegalTech et RegTech tracent la voie”. It details practical uses such as legal big data, data protection (LPD, RGPD), evidence management, compliance and Contract Lifecycle Management (CLM).

1.3 – Clients of LegalTechs

The LegalTech sector targets two very distinct types of customers. It is aimed at both legal professionals and private individuals.

1.3.1 – The legal professions: lawyers and in-house counsel

The legal profession is undergoing profound change. As in other areas of consultancy, automation and dematerialisation are helping to eradicate all low value-added tasks. Lawyers and consultancies are now taking these developments on board and are gradually adopting the LegalTech solutions on the market. By saving time and therefore money, it allows the firm’s work to be focused on areas where the lawyer offers real added value to clients.

1.3.2 – Individuals with legal needs

LegalTech is also making the law more accessible for individuals. If they are looking for legal services that are directly available online, affordable and without the need for a law firm or legal adviser, this is the solution. In this sense, Tech is democratising the practice of law based on the “do it yourself” principle, for example by enabling people to draw up their own documents such as contracts or letters.

2 – What is a RegTech company?

How does a RegTech differ from a LegalTech? Even if the line sometimes seems thin, it is still possible to distinguish between these two types of start-ups.

2.1 – Definition of RegTech

RegTech stands for Regulatory Technology. The fundamental aim of the services offered by RegTechs is to help users to remain or become compliant with any regulation or law. RegTech considers all the relevant government texts, whereas LegalTech focuses solely on the acts and ordinances.

RegTech solutions are used to meet regulatory and compliance requirements, and to issue the reports required by financial institutions. Thanks to new technologies, they provide greater efficiency and a reduction in risks and costs. It is often a way of combating the complexity of regulation.

2.2 – Areas of intervention and users of RegTechs

RegTechs cover all the needs of regulatory activities, both for banks or financial institutions and for the lawyers or consultancies that support them. These companies operate in the following areas:

• regulatory watch ;
• regulatory reporting ;
• compliance management ;
• risk management ;
• data protection (LPD, RGPD, etc.) ;
• asset management (application of the FinSA in Switzerland in particular).

3 – e-Reg: LegalTech or RegTech?

The aim of easy Reg is to simplify regulation by saving time on a day-to-day basis for those involved. It is aimed both at banks and at their legal environment.

3.1 – What services does the easyReg online platform offer?

We have designed the e-Reg tool to provide technological services around financial regulation. This “regulation centric” platform offers the following functionalities:

• search engine based on keywords, references or filters and in four languages ;
• full information on the regulatory context, so that you have an overall view of the regulations, with immediate access to the texts via clickable links ;
• the possibility of enriching and analysing regulatory information by adding comments ;
• collaborative tool for regulatory projects within a team ;
• knowledge management, thanks to information-sharing functions, traceability or comments, useful in particular for absences or special treatments ;
• library of applicable regulations, all in a multilingual system.

3.2 – Why is e-Reg part of LegalTech?

e-Reg is used in law firms that carry out assignments relating to financial regulations. This use by legal professionals makes our tool a LegalTech. In fact, e-Reg provides them with a totally digital simplification of regulations.

In particular, they have access to all acts and ordinances in force in Switzerland. But above all, they have access to all the explanatory reports, consultation documents, circulars and FINMA communications, self-regulation and all the other documents that provide a complete overview.

3.3 – How does e-Reg go further as a RegTech?

But e-Reg is not just a LegalTech. It is also a RegTech. On the one hand, the solution covers all financial regulation, well beyond acts and ordinances. Thousands of pages and reports, regulatory texts, FINMA circulars, FINMA communications, explanatory reports, etc. are available online. And let’s not forget the evolution of regulation and its context.

Furthermore, the majority of e-Reg users are professionals with no legal training. These are employees in the financial services sector, both in banking establishments and in consultancy firms. For these two major reasons, we usually say that e-Reg is a RegTech rather than a LegalTech.

LegalTech, but above all RegTech, our e-Reg collaborative platform simplifies financial regulation for you, beyond the legal aspects alone. From regulatory research to monitoring and managing regulatory changes, we offer a comprehensive SaaS-based tool that is easy for your teams to learn. Schedule a meeting with Enrico Giacoletto. He will organise a personalised demonstration of e-Reg for you.

Whatever their field of activity, companies and financial institutions are faced with the challenge of regulatory compliance. In any organisation, risk management means complying with various regulations, acts, ordinances and decrees. In this context, regulatory monitoring plays a vital role and must be optimally structured.

The financial services sector is particularly exposed to this need for curation. We give you our vision of good regulatory monitoring, with its challenges, the bad practices to avoid and the best ones to put in place. You’ll also discover how the e-Reg RegTech is helping companies to improve their processes through effective regulatory monitoring tools.

1 – What is regulatory monitoring?

The concept of monitoring, sometimes referred to as curation, can be found in a wide range of sectors. Regulatory monitoring concerns all economic players who have to comply with a legal text, an ordinance, a regulation, a standard, a benchmark, etc.

1.1 – Definition of regulatory monitoring

Regulatory watch means implementing a structured process for researching, identifying and analysing new piece of legislation that may affect a company, bank or organisation. It also means understanding the impact on the company structure, so as to implement the regulatory changes needed to achieve compliance.

A legal and regulatory watch activity involves both monitoring and anticipating changes. National and international regulations can potentially have an impact on a company’s strategy. “Prevention is better than cure”.

1.2 – Areas requiring the most regulatory compliance monitoring

Regulation exists in many sectors. This is also the case for monitoring activities. As a RegTech provider, we are interested in financial regulation. It is an essential part of the:

• banks and financial institutions, including Swiss FinTech’s within the meaning of Art. 1b LB ;
• financial regulatory advisory firms ;
• audit firms ;
• law firms.

Outside the banking sector, the concept of regulatory monitoring also makes sense for :

• HSE (health, safety and environment) ;
• ISO-type standardisation activities ;
• health ;
• employment law.

2 – What are the challenges of good regulatory monitoring for the financial sector?

Setting up a regulatory monitoring is not really an option. Considering the stakes and risks of non-compliance in the banking sector, the approach merits thorough examination.

2.1 – Mastering the number of applicable regulatory sources and regulatory changes

Financial regulation is a constantly evolving field. In Switzerland, managing financial regulation involves consulting and analysing thousands of pages from a variety of sources. This field is constantly growing and evolving, for example with the provisions of Basel III and Basel III final.

Banking regulations are constantly evolving and demand ongoing adaptation by financial services professionals in order to comply with them as proactively as possible. This is what monitoring is all about: identify and understand the regulatory changes that have already been adopted or that are still to come, within this vast and ever-changing volume of information.

2.2 – Avoid the negative consequences of insufficient compliance with regulatory requirements

Regulatory monitoring means anticipating and acting in advance. Without regulatory monitoring, a banking institution runs the risk of being unaware of the existence of a new text with which it must comply. This lack of knowledge of the given provisions to be applied exposes the financial institution to unintended risks. These include the costs of non-compliance, as well as the reputational risks involved. But it can also have negative external consequences, such as greenwashing practices in the field of sustainable finance and SRI investments.

2.3 – Save time in regulatory monitoring by implementing relevant curation tools

Regulatory monitoring means working proactively and anticipating changes in regulatory requirements, so that you have time and serenity.

Let’s take the example of ESG standards around the world and their impact on Switzerland. The body of regulations at international level is constantly evolving and growing. Convergence towards global standards could even be on the horizon. It is imperative for Swiss banks to keep a constant watch on the subject.

To win the regulatory game, those involved in monitoring must identify the right curation tools for this ongoing task. The people in charge of monitoring can design a regulatory management system that is embedded in the institution’s processes and activities. They then have the tools they need to manage change, once the need for change has been identified and quantified.

2.4 – Managing regulatory change: a must if you want to keep your licence to operate

The final key issue in regulatory monitoring concerns the holding of authorisations or licences granted by FINMA. Take, for example, the case of Swiss FinTech’s, which must obtain the authorisation provided for in art. 1b LB. Entities in possession of such authorisations must remain vigilant in order to retain them.

There are numerous categories of authorisation issued by FINMA. They all imply the need to maintain a regulatory watch, whether for an asset manager, a bank or a self-regulatory organisation.

3 – What are the constraints of regulatory change for regulatory players?

Changes to regulatory texts present many practical difficulties for organisations. Without a structured process, they can become a real burden on a daily basis.

3.1 – Extensive work to bring about regulatory change

As the number of changes to regulatory texts in a financial institution’s environment increases, so does the task of implementing the changes. When those involved in regulation have little insight into new developments, they find themselves managing the work under pressure.

3.2 – Difficulty in analysing current regulations and future developments

Those responsible for regulatory management in financial institutions can find it difficult to identify and interpret proposed changes. Without the full context of an easily accessible text and the international regulatory environment on the subject, these professionals lose time in their work.

3.3 – The possibility of having to comply with several jurisdictions

The complexity of managing regulatory change described above can arise within a single jurisdiction. It can also be explained by the fact that an institution is subject to several jurisdictions:

• actively, because it actually carries out an activity ;
• passively, due to the increase in the extraterritorial aspects of certain laws.

3.4 – The multitude of deadlines or impacts caused by regulatory change

Provisions or requirements that have multiple consequences complicate the management of regulatory changes within banks. When the new text adds multiple changes and at different dates, change management becomes more cumbersome. It is better to have a structured regulatory watch to anticipate and assess the consequences as early as possible.

3.5 – The complexity of monitoring a regulatory project without a dedicated tool

Managing emerging risks involves keeping a close eye on regulations which may still be under development. On the other hand, when it comes to actually managing a change that has been written into an act, monitoring is carried out in a coordinated and close-knit way with the concrete implementation actions. By operating in this way, with a project management IT solution, the whole organisation gains in efficiency. Having to manage a regulatory change without a tool seems to us to be a very risky way of ensuring compliance.

4 – Regulatory monitoring practices and tools to be avoided

Before turning to the virtuous methods and organisations of good regulatory data monitoring, here are the bad practices to be avoided absolutely.

4.1 – Carry out regulatory monitoring using free tools such as spreadsheets

The current complexity of Swiss, European and international financial regulations calls for robust equipment. Thus, thinking that financial regulations can be tracked using an Excel spreadsheet seems to us utopian to us. This kind of action is as ineffective as using CTRL+F in PDFs. At a time when new technologies are improving semantic or vector-based research, it’s better to forget about free monitoring tools and really address each regulatory reference.

4.2 – Curating regulations without actually using them

Another practice is sometimes to monitor regulatory developments, but not to learn enough from them. Institutions that do not devote sufficient resources or budget to analysing the data generated by monitoring miss out on opportunities. It cuts itself off from exchanges with the right players. It misses out on strategic thinking for the benefit of business development. This is also the case when it comes to adopting a line of defence in the face of a risk or threat assessment.

4.3 – Operating in fire-fighting mode to manage regulatory change, without actively anticipating it

No surprise is bad except if it is late. The other classic mistake is to leave regulatory monitoring to the last minute. In fact, this is not monitoring management at all. It’s simply a matter of implementing regulatory changes under pressure. There is also the risk of having to deal with surprises and crises. This leads to additional financial costs, particularly because of the scarcity of available resources. This constrained or crisis mode undermines the objectives that have been set.

4.4 – Thinking you can make savings by ignoring the regulatory monitoring process

Finally, establishments that look at their costs and refrain from structuring regulatory monitoring are penalising themselves. Good monitoring with sufficient anticipation enables a broader approach. This process reduces the risk of non-compliance due to unfamiliarity with legislation. It reduces the need for crisis management and the associated additional costs.

5 – How should you structure your regulatory watch?

Furthermore, what are the best practices to adopt? Which regulatory monitoring tools should you choose to optimise the process? How can you avoid reactive and emergency mode? We believe that the methods used in change management are essential, as is calling on a RegTech service.

5.1 – Supervise regulatory monitoring in the context of change management

At easyReg, we believe that the management of regulatory change should follow the same philosophy that companies adopt when it comes to change management. Or rather, change management must natively integrate all external and environmental developments, including regulatory ones.

With a structured process of this kind, an organisation or company achieves the following step by step :

• correctly identify the nature and impact of the changes to be made well in advance of the deadlines;
• define the necessary adaptations, as well as the appropriate resources at the lowest cost ;
• design a retro planning schedule with sufficient adaptability, a classic process for regulatory projects (organising to meet a deadline imposed by legislation) ;
• confirm the impacts and assess their magnitude on the structure (H/M/L).

In this way, the financial institution can take the appropriate strategic decisions :

• the simple adaptation of business lines, tools or documents relating to the business model, operations or internal policies ;
• to major strategic changes, or even a change of jurisdiction.

5.2 – Raising awareness among experts ahead of regulatory changes to mobilize the right people at the right time

This process of managing change around regulations requires upstream communication, information and awareness-raising. The staff in charge of regulatory monitoring are committed to mobilising the resources that count in the organisation: the SME (Subject Matter Expert), i.e. the experts.

5.3 – Equip yourself with regulatory monitoring tools tailored to the finance sector

This change management requires the use of appropriate monitoring tools. The aim is to maximise the efficiency of those responsible for curating information and managing the resulting regulatory changes. The sheer quantity and complexity of information sources makes it impossible to handle this monitoring task manually or with office automation.

5.4 – e-Reg, a RegTech platform or regulatory monitoring solution for the banking sector

As players in regulatory management, we have developed a RegTech platform: e-Reg. This online solution is designed to simplify and digitalize regulations. It includes all the necessary regulatory functions:

• finding information in current or draft texts, with the full context ;
• tools for analysing and annotating texts and for notifying teams ;
• a dashboard for collaborative management of regulatory changes and projects;
• knowledge management ;
• management of regulatory libraries, both for data external to the company and for its own internal policies and procedures.

Regulatory monitoring is a process that needs to be deployed upstream of regulatory change management and compliance monitoring. As the cornerstone of risk management for financial institutions, this monitoring activity requires equipment. RegTech solutions such as e-Reg combine technology with knowledge of business issues. We invite you to find out more about our platform and the features available to our users.