Tackling EU regulatory challenges with cloud and blockchain

MiFID II will require firms to retrieve records of any trades they have undertaken, at any time, and very quickly.

Soon after the UK rings in the new year, when most hangovers have subsided, many compliance and IT managers across the UK will unfortunately run right into their second big headache of the year – the arrival of the Markets in Financial Instruments Directive II (MiFID II) market reforms.

You’d be surprised. In fact, this upcoming milestone provides a good example of how the right technology can play an essential part in meeting the strict challenges of MiFID II and a range of other major regulation.As the UK head of a company best known for its communications solutions, you might think that this wouldn’t be a priority subject for us at Avaya.

MiFID II extends the original 2004 directive to affect all businesses engaged in the dealing and processing of ‘financial instruments’ (shares, bonds. commodity trades and derivatives and so on).

The original MiFID did include requirements for transparency in how firms communicated with their customers, and checks to verify that proper process was followed. Most of these were introduced before the rapid advancements in digital and social media communication became so widespread. So, MiFID II carries serious implications to how a wide range of businesses conduct their communications.

Recording calls, and managing data

Providing assurance and proof regarding interactions with customers (in the main: recording calls) is a key part of the new MiFID II directive. What’s new is the requirement to collect richer forms of data, which must be stored and retrievable for longer periods. Compliant businesses must timestamp, report and store all customer conversations “intended to lead to a transaction” for up to seven years. All this must be done in a readily accessible manner, available for audit by the FCA upon request, and businesses must further review their recordings on a regular basis to ensure that they remain compliant.

IT teams and regulatory teams need to have everything in place to capture all this new information without fail, unless they want to face the significant ‘failure to comply’ fines that are also seen in the General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCI DSS). Any lost data point on a customer could have a massive impact on the balance sheet of a company for years.

Historically, call recording, storage and retrieval has been an expensive and laborious task for businesses, requiring multiple providers to offer recording across both mobile and fixed voice channels. Frankly, many businesses looking to achieve compliance using older, on-prem forms of communication have been staggered by the costs associated with that approach.

The solution lies elsewhere. In the cloud, in fact.

Learning to love Cloud communications

Financial services have typically been very cautious about moving to the cloud, mainly due to security and confidentiality concerns. However, MiFID II and other regulations are rendering the cost of holding the needed data unrealistic.

At Avaya, we’ve done extensive work to expand our cloud services and solutions, to ensure we offer the reliability financial services organisations require. A most recent example is our collaboration with BT Wholesale, combining Avaya’s IP Office Cloud and Contact Centre Select solutions for comprehensive, fast cloud-based intelligent call recording. This solution is ideal for small and midsized businesses, but the same challenge exists for large institutions with thousands of legacy devices. It runs contrary to the costly ‘rip and replace’ model.

With these records being stored in the cloud, security becomes even more important. Emergent technologies such as Blockchain are providing new ways to ensure that compliance with MiFID II is maintained without compromise. Leveraging the power of blockchain includes the means to immutably record transactions on the Blockchain and deliver a fully auditable source of proofs.

The final frustration financial services businesses face in embracing the cloud is a lack of customisation or control over the services they are introducing. An ‘it does what it says on the tin’ approach ignores the complex requirements that are unique to each company. Financial services want flexible service options and configuration of their platforms to their own specific hybrid or fully on-premise requirements. A system that sits across existing infrastructure reduces budget impact and helps ensure a smooth and timely transition to a MiFID II compliant solution.

MiFID II will require firms to retrieve records of any trades they have undertaken, at any time, and very quickly. Several years ago, this would have been a daunting proposition. Today, recording platforms have grown more intelligent, and scouring and identifying specific characteristics is far faster. The communications analytics that sit behind these recording platforms mean firms can quite easily create reports that include analyses of real-time statistics, historical data and trends.

Cloud cover – protecting businesses and their customers

Ultimately, the purpose behind MiFID II is to help and protect customers. But the benefits to companies who upgrade their communications are just as meaningful. The UK financial services industry can learn lessons from their contact centre peers, with better post-analytics of calls serving as an improved training aid for new and experienced employees alike.

Even if we weren’t operating in an age of major regulatory change, the rapid evolution of technology would present a major opportunity for businesses of all kinds. Whatever headaches regulatory change are causing, the solution can be found in services designed with tomorrow’s needs in mind.  With 2018 just around the corner, solutions that take full advantage of the cloud, are non-intrusive and are easy to scale, are ready to help meet and exceed the demands of MiFID II.

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