MCO is one of the leading providers of regulatory and risk technology for financial services. We proudly received the RegTech Insight Award 2020 in the category “Best Vendor Solution for Managing Conduct Risk”. In an interview to the RegTech Insight team, our CEO, Brian Fahey tells the company history, how the solution has evolved and in which ways MCO helps its customers globally.
Watch the interview and discover a bit more about MyComplianceOffice and its Conduct Risk and Compliance solutions.
RegTech Insight: Tell us about MCO
Brian Fahey: MCO started as a concept in 2006 when we were part of Fidelity Investments. The core team had built a number of solutions at large financial services firms. And we were frustrated by the short term focus of a lot of these budgets and schedules that you inevitably end up with large financial services firms. So in compliance solutions an issue would rise, maybe there's a new regulation, and budget was created to solve that, but usually within a short timeframe, and each individual siloed system was created and built.
And the result was a lot of individual point solutions that didn't really talk to each other, and there was never really a project or a budget to integrate them later. And so we really wanted to build out a true longterm compliance platform for the industry. And today we are a firm of over, we provide the solutions to over 400 client firms across 80 countries. And our primary markets are any of the highly regulated countries around the world. And that means like the US, Canada, the various European Union countries, various Asia-Pac countries and some other well-regulated countries. And so today, 12 years on, we use the same core platform that we used back then, we've the same design team continuously innovating as the technology changes, and of course, as the regulatory needs have changed in conduct risk over that same period.
RegTech Insight: Why did you develop the MCO Conduct Risk Solution? What problem does it solve for customers?
Brian Fahey: So it really was to build a better longterm compliance platform. And the three broad principles are to build an integrated platform, for the longterm, and use a centralized data set across those activities, and ensure that is operationally efficient for everyday use. And they probably sound a little dull, but they are really what made a great longterm technology platform, and enables continuous flexibility and innovation around it as the market changes.
RegTech Insight: How does it differ from what customers may do today?
Brian Fahey: Well, in conduct risk you've got three broad categories of activities that you want to monitor. So firstly, you've got all the firms transactions in financial services. There are various such things like trading, asset management, investment banking deals, loans, and those are activities that you monitor to ensure that the conduct in those are appropriate around them for the firm. Then you have the third parties that you are transacting with, whether it's investment banking deals, or maybe just trading, or asset management around them, loans, et cetera. And you will need to monitor those third parties to ensure that there isn't misconduct associated with them. And then finally it's what the employees are doing. And this is typically as they interact with the transactions and with those third parties.
Today, the extreme majority of clients that we or prospects that we talk to, they perform those activities with very siloed systems that don't talk to each other and, the system that monitors the third party activities doesn't really talk to the investment banking deal management system. And this creates real challenges in around seeing if there are potential conflicts across those divisions and where there might be, does the left hand know what the right hand is doing in terms of those activities, and where there may be conflicts? And if the systems aren't talking to each other and are siloed, it's very difficult to do that.
RegTech Insight: How do you think Conduct Risk compliance challenges will develop over the next year or two?
Brian Fahey: I think the monitoring of third parties that the clients do business with is the real key change and evolution that is going on in the industry. Firms do have, as I said earlier, various systems for monitoring transaction activities and employees activities, but it's really the continued evolution of the third parties and really putting together an end to end solution around monitoring them. That starts with onboarding the third party, maybe doing a KYC check, doing risk assessment, and then monitoring the ongoing activities that you're doing with that third party.
You're also doing the sort of employees activities, and you might be doing continued due diligence then around the third party as needed. So it's the sort of end to end, monitoring the third party in the life cycle with the firm, combined with then what employees activities are doing with that third party ,and what the firm's own transaction activities are doing. So the firms have that information about those transactions and what the employees are doing, but it's typically very limited information then about the third parties. And it's certainly not integrated across the systems.
It is evolving and it's getting better, an sort of the pushing around AML and KYC has evolved this in the last number of years. I just see it sort of extending beyond that into that full life cycle around that third party. And then comparing that data set, as I said, to the other two groups, like the transactions of the firm and the employee activities.
RegTech Insight: What does winning this award means to you?
Brian Fahey: Well, being voted the winner in our category is very satisfying. It's very rewarding to be recognized by the industry as a whole and it's a great vote of confidence for us. And we spent many years developing this product and the award validates those efforts. And we've really created the kind of solution that we have been striving for, around a better solution for the industry, and providing a better conduct risk solution for the industry enables these firms, our client firms, to have better overall compliance platforms, which ensures that their reputations are being protected, and that they are abiding by the principles and rules of the various regulatory environments that they are around the world, which is great for the broader community as a whole. And we're proud to be part of that endeavor and proud that we've been recognized for it.
