Inside magazine issue 12 | Part 01 - From a digital perspective Looking beyond traditional borders allows banks and wealth managers to have access to larger pools of clients as well as retain and serve existing clients better. 40
Inside magazine issue 12 | Part 01 - From a digital perspective Outside of the EU—coping with disparate local rules Such harmonization is even more limited, if not non-existent, when looking at markets abroad. The servicing of clients in Dubai, Sao Paulo or Shanghai therefore requires compliance with disparate regulatory and tax schemes, increasing the risk for daily business activities. Risks and opportunities from crossborder business Looking beyond traditional borders allows banks and wealth managers to have access to larger pools of clients as well as retain and serve existing clients better. They are, however, facing several challenges inhibiting the development of a real crossborder strategy: and customer due diligence frameworks, which should take into account the specific regulatory requirements of the client’s country of residence. These changes in operations are often quite burdensome as the regulatory information is spread over many directives, laws and regulations, which deal with many different subjects. This causes a further increase in operating costs, and has a direct impact on the industry’s profitability. Coping with the new challenges Identifying the regulatory, compliance and tax risks associated with cross-border banking services is complex but essential for players to remain competitive. The complexity of cross-border business activities stems from the individual country requirements concerning investment The complexity of cross-border business activities stems from the individual country requirements concerning investment suitability, cross-border regulation and tax transparency: a country-specific so<strong>lu</strong>tion is therefore necessary. Digitization of such country-specific information appears to be the most appropriate so<strong>lu</strong>tion, allowing both a quick access to and easy comparison of local rules applicable to a particular service or financial product. A regulatory-compliance tool reunites key features allowing financial institutions to cope with cross-border challenges. First, it allows for the gathering of a large quantity of information in a single database. Second, it returns only the necessary information in a user-friendly way resulting in increased flexibility. Finally, it allows clients to be followed to their residence country without taking the risk of missing regulatory or tax requirements. The digitization of country-specific knowledge should summarize regulatory, compliance and tax information about permissible activities, products or services under national and international regulations. It should allow private bankers to challenge their strategy by comparing countries’ local requirements, by identifying which country allows a particular service or activity or by ranking countries’ openness to banking services or activities. The digital so<strong>lu</strong>tion should be as flexible as possible covering every possible cross-border situation, independent of whether the client travels to the bank, the CRM flies to the client’s location, or the service is provided remotely. •• Difficulty of assessing and comparing the real cost of compliance when defining the firm’s cross-border strategy •• Identification and mitigation of the potential risks arising from the client’s location •• Monitoring of the increased regulatory (and reputational) risks associated with the dependence on Relationship Managers’ knowledge of the cross-border rules while they increasingly travel within and outside of Europe •• Compliance with strengthened antimoney laundering (AML), investor protection and tax requirements in terms of information sharing and cooperation This complex regulatory environment and the differences between countries mean that banks have to adapt their products suitability, cross-border regulation and tax transparency: a country-specific so<strong>lu</strong>tion is therefore necessary. Only then can a bank or a private wealth management firm decide how to structure their crossborder strategy, allowing them to identify which country to target and what level of compliance effort will be required. Moving to the daily provision of daily business activities, customer-facing employees need to be properly equipped to ensure compliance with multiple local rules when servicing clients abroad. One so<strong>lu</strong>tion is to increase the awareness of CRMs in this specific field, as they are the ones who cross the borders and who put their bank’s image and reputation forward on a daily basis. However, as CRMs are highly mobile, the regulatory compliance should be as well. In short, the cross-border business regulatory and tax awareness so<strong>lu</strong>tion should ideally be digital and easily portable, as CRMs do not always have the opportunity to prepare for a client meeting from their office’s desktop but rather prepare “on the go.” While digital often refers to connectivity, the so<strong>lu</strong>tion should allow databases to be used offline as CRMs may attend a meeting where no internet connection is possible. 41
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