The SmaRT platform consists of the SmaRT-Workbench, SmaRT-Worker, and SmaRT-Knowledge Base.
Financial institutions are estimated to have spent over $100 billion on regulatory compliance globally in 2016. Much of this is spent on legal advisories, consultants, and professional services. In the period 2008-2016 over $200 billion is estimated to have been spent by retail banks alone on such services, almost double that spent in the lead up to the crisis.
Financial institutions are looking to cut costs by switching from people and services to RegTech
Whether it is to avoid incurring penalties or minimize the costs of compliance. They are looking to Artificial Intelligence (AI) and Machine Learning (ML) solutions, either in-house or from third-parties, to make regulations more human friendly and machine readable. However, regulators, such as the Financial Conduct Authority (FCA), are also looking to RegTech to do likewise, this time at source—for example, the FCA Handbook.
The upshot of all this is that just as FinTech has disrupted the financial industry, RegTech is set to disrupt the legal industry and GRC space. SmaRT can help swing the balance of power back to lawyers, as professional services firms and RegTech firms are ‘eating their lunch’. The key advantage of SmaRT is that a law firm or financial institution can build a knowledge base of regulations, represented as regulatory vocabulary elements and regulatory rules in a cumulative fashion. Having legal knowledge captured in an RDF Triple Store has several important advantages.
Perhaps the most important aspect of this approach is that it permits legal firms to create a corporate or organisational memory and perform legal knowledge management and enable legal knowledge engineering. SmaRT, for example, can persist a legal interpretation of a regulatory provisions at t1, including the Mercury rules, vocabularies, the lawyers notes and workings, and the original text of a piece of legislation or regulation. Thus, at tn, lawyers can roll back to inspect the entire workflow, interpretations and decisions and validate provenance. Alternatively, if regulatory provisions change or are updated, the task of identifying changes and updating rules is made much easier through the use of AI-based semantic technologies.
A SmaRT Knowledge Base can be linked to external knowledge bases and other data sources.
Lawyers can link business and contractual terms to those in the Financial Industry Business Ontology. Likewise, the International Accounting Standards Board (IASB) is currently mapping its International Financial Reporting Standards (IFRS) and taxonomy to RDF/OWL, which should help link regulatory provisions to accounting standards. However, the most important and disruptive possibility here is linking a regulatory knowledge base to that of a financial institution(s).
Currently, professional services firms advise/contract to banks and develop business policies, procedures and controls linked to regulatory provisions. SmaRT provides an opportunity for law firms to innovate and add value to its legal advisories through actively competing in the GRC and Regulatory Risk Intelligence ‘market’ currently being serviced primarily by the Big 4 and other professional service firms. With the proliferation of RegTech, RiskTech, LawTech providers and related solutions, the risk of disruption in the provision of Legal Services presents a clear and present danger to the Sector.