lu_inside12-full

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 solution
is therefore necessary.
Digitization of such country-specific
information appears to be the most
appropriate solution, 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
solution 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 solution
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
solution 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 solution
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 solution should
allow databases to be used offline as CRMs
may attend a meeting where no internet
connection is possible.
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