UK’s RegTech company Napier expands to Malaysia

• Organizations are still trying to understand how they can use RegTech. 
• Napier’s view of AI is it must be explainable and be able to provide informed insights.
• Napier recently selected Kuala Lumpur, Malaysia to set up its center of excellence.

As digitalization takes over the financial services industry (FSI), regulators continue to come up with rules to ensure FSI players are careful about how they use technology. Be it the use of cloud services or AI, regulators not only set the guidelines for security, but also set the standards for which FSI players can use technology.

Meeting the requirements is a prerogative that FSI players can’t afford to take lightly. But with different nations having different sets of rules and regulations when it comes to the use of technology, the industry needs to rely on technology to ensure it meets these requirements.

This is where regulatory technology (RegTech) comes in. RegTech is the application of emerging technologies by FSI players to improve the way they manage regulatory compliance. Today, FSI players include not only banks and insurance companies, but also many fintech companies that are offering financial services.

While the premise of financial regulations is more or less the same in almost all countries, there are still some requirements that these organizations must meet. For example, when it comes to issues like money laundering, AI can not only help solve the problem but also speed up the process.

The AI dilemma in FSI

But how much AI can these institutions use? Where do they draw the line when it comes to compliance?

RegTech helps the industry deal with this. RegTech service providers like Napier help FSIs apply AI in a use case-specific way that is not only regulatorily compliant but also less costly. The London-based RegTech company is already working with the UK’s largest fund administrator to enhance its financial crime risk management platform.

Specifically, Napier’s RegTech delivers anti-money laundering and compliance software to financial, payments and gaming institutions. Napier designs and engineers technological innovations to drive down financial crime.

Napier’s technology has also seen the company expand its operations to Southeast Asia. Currently, Napier’s market, which includes Singapore, Malaysia and Thailand extends beyond the region, with clients in Australia, New Zealand, the Pacific Islands, Hong Kong, Taiwan, China and Japan.

According to Michelle Kam, COO for APAC and regional head of professional services, Napier’s current focus in Southeast Asia is on serving the regulated industries – namely banking, payments, asset management, wealth, and gaming.

“Supporting financial services in the digital era requires the underlying compliance processes to be intelligent, effective, efficient, flexible, and scalable. In that pursuit, Napier has built a comprehensive suite of products to unify financial crime compliance operations by breaking down the siloed systems and resource-intensive processes at financial institutions,” said Kam in an interview with Tech Wire Asia.

Kam explaind that Napier’s products provide institutions with a holistic view of risk across their financial crime compliance processes, including monitoring, screening, and client activity review, in a low code/no code environment to let compliance teams make risk-based decisions efficiently and effectively.

“Due to the confidentiality of some of the ongoing work being done with our clients, we can share that they come from the banking, payments and asset management sectors. Globally, some clients we work with include: Mizhuo Bank Luxembourg, Credit Suisse, Starling, Banco do Brasil, Alpian, Starling, Trustly, Australia Post, Lyra, Dubai International Finance Centre, Satchel, ZTL, St James’s Place, IQ-EQ, SS&C Europe, LGIAsuper, ClearView, Utmost Group,” added Kam.

The challenges of RegTech

Despite RegTech being around for some time, businesses in Southeast Asia face several common challenges when it comes to using the technology. Firstly, the complex regulatory environment in the region is constantly evolving. As such, businesses need to navigate through multiple regulations, compliance requirements, and reporting obligations. This complexity can be challenging to manage and keep up with.

Secondly, there is a lack of awareness and understanding of RegTech. Many businesses may not be fully aware of the potential benefits and capabilities of RegTech solutions. There may be a lack of understanding about how these technologies can streamline compliance processes and enhance regulatory risk management.

In the banking and payments space, there is a focus on fraud, rather than on money laundering, so customers are focused on transaction monitoring, without focusing on the need to screen customers against sanctions and PEPs list.

Finally, there are data security and privacy concerns. RegTech solutions often involve the collection and processing of sensitive data. Businesses need to ensure robust data security measures and comply with data protection regulations to maintain customer trust and avoid potential breaches.

“Napier AI’s strengths lie in our advanced AI technology, regulatory expertise, data integration and analysis capabilities, automation and efficiency, risk management capabilities, scalability, adaptability, and user-friendly interface. These strengths let businesses effectively manage regulatory compliance and mitigate risks in a rapidly changing regulatory landscape.

Napier partners with key organizations, including the world’s leading data providers, like Dow Jones and Refinitiv, and global consulting firms, to provide informative sessions to the financial crime compliance community,” explained Kam.

AI and RegTech

With AI getting new levels of press and prominence thanks to the explosion of generative AI platforms, the need for ‘explainability’ in AI continues to grow. Kam pointed out that Napier’s view of AI is that it must be explainable and able to provide informed insights that help financial crime compliance teams speed up their decision-making in the event of a suspicious event trigger.

“At Napier, our in-house team of data scientists are exploring generative AI and ensuring explainability. Why? Anti-money laundering (AML) regulations require extremely high levels of explainability and transparency of the systems implemented by financial institutions. And for good reason – regulators and law enforcement need to build a meticulous case if they are to successfully bring down global criminal networks,” said Kam.

While financial services regulators have embraced the concept of AI and the operational efficiencies it might bring, they are not yet comfortable with the idea of AI designing AML strategies. As such, Kam explained that there is little specific regulatory provision for the use of AI in AML, and financial institutions must tread carefully in how they apply new technologies to their financial crime compliance operations.

“As AI systems grow in complexity and capability, so does the need to ensure their reliability, fairness, and accountability. This’s why it’s crucial to refrain from considering testing and explainability as merely initial steps in the process. Instead, they should be seamlessly integrated into the entire production cycle and the model’s live deployment,” added Kam.

Kam also said that when considering how AI might uplift performance in AML operations, such as false positive rate (FPR), organizations need to have a really strong baseline of existing system performance against which to verify any new AI system. For example, Napier’s customers can achieve a 97% reduction in FPR using rules-based strategies, and then an additional 40% uplift when applying AI Advisor to provide additional strategies.

Napier’s Center of Excellence

Given Napier’s growth in the region, it makes sense that the company recently selected Kuala Lumpur, Malaysia to set up its center of excellence. The city’s strategic location allows businesses to serve a wide range of markets and customers efficiently.

Kam explained that Napier’s decision to set up a center of excellence in Kuala Lumpur was driven by the city’s well-educated and skilled workforce. By utilizing the talent pool in Kuala Lumpur, Napier aims to strengthen its technical support team, which is projected to grow by 2024.

She also pointed out that the team in Kuala Lumpur will bring their expertise and experience in Napier’s product set and customer needs. That will not only enhance the capabilities of the APAC team, but also allow them to serve customers both locally and globally. The technical support provided by the Kuala Lumpur team will contribute to Napier’s delivery of high-quality service and support to its global clients.

“Overall, the establishment of the center of excellence in Kuala Lumpur will let Napier to tap into the skilled workforce and expertise available in the city, further strengthening their technical support capabilities and expanding their reach in the APAC region and beyond,” concluded Kam.

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