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In a move to simplify compliance matters, thousands of businesses will qualify for “simpler corporate reporting rules”, according to a UK government proposal.

That might just be music to the ears of those who work in compliance at fund operators because they are currently inundated with compliance paperwork due to the sensitive nature of their roles.

A failure in security or a lapse in legal judgment could result in significant reputational and financial damage; however, the changes could ease restrictions and enable freer choices. But will businesses do them?

Why does this matter? 

Compliance regimes at fund operators face onerous reporting requirements, but have been hesitant to embrace new technology due to compliance issues, according to a new report; this change might just help them in a meaningful way. 

“Our mission is clear: to create the right environment for investment through our regulatory reforms, to crowd in capital through our public financial institutions."

In a comment to the BBC, Business Secretary Peter Kyle, acknowledged that compliance regulations burden companies and should be slashed. The acknowledgement comes at a time of increased private/public engagement led by the current government.

This year, the government announced the Mansion House Accord, which will see the largest pension funds in the country invest up to £50 billion into infrastructure, property, and private equity, in hopes it’ll kickstart investment in the UK. Moves like this are part of the wide-ranging actions by the government to counteract the UK’s sluggish growth.

“Our mission is clear: to create the right environment for investment through our regulatory reforms, to crowd in capital through our public financial institutions,” said Rachel Reeves, Chancellor, at the Regional Investment Summit in Birmingham, on [insert day].

The UK government has made business growth its key manifesto policy and is adamant that it can achieve this through cutting red tape.

This is something financial services companies consistently bring up as a blocker to growth.

What are the specifics?

As part of the changes, Reeves said smaller businesses will have reduced government reporting administration, “as part of a 25% admin reduction target”.

Reeves gave examples such as breweries easing supply chain worries about where their hops came from, and café owners not having to fill in forms at Companies House.

“The burden of unnecessary red tape and bureaucracy ramps up their costs and damages competitiveness."

However, for financial services firms, it could reduce the amount of form-filling in but also compliance around capital management, solvency, and reporting, which have increased since the 2008 Great Financial Crisis. There has also been increased compliance and administration with the rise of sustainability.

“The burden of unnecessary red tape and bureaucracy ramps up their costs and damages competitiveness,” Jane Gratton, Deputy Director of Public Policy at the BCC, said in the government’s press release. “Now is the time to boost growth, and changes like this can help. Firms will need to be consulted to ensure any initiatives have maximum impact.”

Might this give operations teams more time to augment AI in the compliance field? 

Coming wave of AI adoption in compliance

What this means could be difficult to tell for companies. Many could be too nervous to cut back on compliance, considering the government levies some considerable penalties on firms that cut corners.

Before those in compliance start work, according to Ritchie Puckey, Head of Compliance at Espria, an IT managed service provider, it might be wise to first ask how AI might affect their compliance obligations.

The government is certainly hoping AI will be a great unlock for businesses and it might even be making it easier to develop. Kyle told the Today programme, that AI software could be exempted from regulation while in development. 

The tech, Kyle added, could “benefit the health, the wealth, [and] the education of our nations".

Might this be a catalyst for some major AI adaptation, and growth, is anyone’s guess. Firms are wary of giving over too much control to AI to do their compliance work. But, the government’s attempt to both slash red tape and limit AI regulation might just help build purpose-built AI software for those in the compliance industry.

That shift, to more effective AI platforms, prone to less hallucinations, might then quell concerns over the use of AI to handle sensitive compliance work.

 

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