Experts Signal Compliance Risk Increase, But Tech Could Ease Your Troubles

As a fund manager, would you be prepared for a rising tide of compliance risks and regulation?

Recent developments and rumblings from both investment and regulatory circles indicate that compliance is gaining even more importance.

And for some it means more complexity and a hike in costs. This might be especially true for organizations or teams struggling with outdated systems or inadequate preparation, as the risks and expenses of non-compliance continue to escalate.

Rules and regulations are constantly evolving, requiring ongoing adaptation to stay compliant. Case in point, the Digital Operation Resilience Act will be in full swing by January 17, 2025, bringing with it new obligations for fund managers and senior executives in private equity investment. This year the European Union also set up the Anti-Money Laundering Authority in Frankfurt.

Although the Fund Manager Code of Conduct was set up in 2003, its last major update was not that long ago in 2018. So, things are constantly on the move.

New Compliance Worries and Rising Costs

A new independent study by PureProfile, in collaboration with Ocorian and Bovill Newgate, found that nearly 88% of private investment fund managers expect compliance risk within their organizations to rise over the next two years.

The study surveyed senior executives and regulation experts across various global markets, including US, UK, Germany, Brazil, Singapore, Hong Kong, UAE, Turkey, Qatar, and Saudi Arabia.

According to Hedgeweek, 81% of respondents in the study reported that compliance-related issues within their organizations have led to the loss of investment mandates or clients over the past three years.

Compliance concerns aren’t just theoretical or living in the pages of expert forecasts. The cost of getting it wrong should be a real, practical consideration for fund managers and others within the industry.

In 2023, the US Treasury announced its largest penalties in history. The fines saw Binance, one of the largest cryptocurrency exchanges, held accountable for violations of the US anti-money laundering (AML). According to the Financial Crimes Enforcement Network, the exchange also failed to perform Know Your Customer (KYC) procedures on a large number of its users.

To combat risks and compliance inaccuracies, it appears that fund managers are looking to invest. Reuters reports that one-third of fund managers expect their compliance teams to grow, perhaps a reflection of the increasing demands placed upon these teams.

And with this expansion will come the inevitable rise in costs. Alarmingly, 45% of firms admitted in the Thomson Reuters Cost of Compliance Report that they do not monitor the cost of compliance across their organizations.

This lack of oversight suggests potential inefficiencies and underscores the need for more effective management of regulatory expenses. But perhaps tech can provide a solution?

Vestlane: A Modern Solution to Investment Challenges

Amid compliance concerns, it's essential for fund managers and indeed investors to have solutions. Industry stakeholders need the right tools to do their job and protect clients.

And through Vestlane, I’m confident we have this in the form of a digital platform. Our team has developed a platform designed to make it easier for fund managers to meet their obligations without getting bogged down in administrative tasks. Investors also get a more streamlined, secure, and transparent investment process in the private marketplace.

Our approach focuses on automation and integration, helping to reduce the time it takes to onboard investors and manage compliance. With our comprehensive KYC (Know Your Customer) and AML (Anti-Money Laundering) processes, fund managers can ensure they are always audit-ready, with real-time data at their disposal.

By offering a shared workspace that facilitates collaboration among fund managers and investors, we aim to set a new standard in the industry.

Our platform addresses the current industry compliance concerns, for sure. But it also positions fund managers for long-term success, allowing them to focus on what truly matters—growing their funds and delivering value to their investors. 

The Vestlane Platform and Its Benefits

1. Investor Onboarding Simplified

Of course, investor onboarding can be a laborious task. It often involves multiple stakeholders and many documents over an extended amount of time.

But Vestlane can significantly reduce the time required for onboarding, allowing repeat investors to complete the process in about five minutes.

Our platform automates subscription document management, tracks capital commitments in real-time, and provides a smooth digital experience for investors. We believe this enhances the investor experience and also reduces the risk of errors and administrative hold ups.

2. A Shared Workspace for Collaboration

Our shared workspace allows fund managers, investors, law firms, and service providers to collaborate with ease. This is really valuable during the fund closing process, where clear communication and coordination are crucial.

By centralizing all necessary documents and communications in one place, Vestlane helps clients achieve their goals faster and more efficiently.

3. Smart KYC/AML Compliance

We’ve talked a lot about compliance. Compliance is at the heart of Vestlane’s platform. We offer a 360° KYC/AML (Know Your Customer/Anti-Money Laundering) dashboard that covers multiple jurisdictions.

This ensures that fund managers are always audit-ready and can easily manage compliance requirements across 100 different regions. 

4. Advanced Data Management and Automation

One of Vestlane’s standout functions is its ability to serve as a single source of truth for all investor-related data.

Our platform includes investor updates, such as signatory changes and cap table adjustments, which are super important for understanding information like ownership stakes, managing dilution, transparency, and future financing rounds.

5. Straightforward Investor Wallet

Want to make reinvestment easy and efficient? The Vestlane Investor Wallet does just that. When an investor is onboarded, their profile can be reused for multiple funds across the Vestlane platform.

This feature includes built-in digital signing, secure communication, and document storage, all in one place. It’s not just about speeding up the process – it’s about giving investors peace of mind, knowing everything is handled securely and efficiently.

6. Data Room

Meanwhile, the Data Room makes the distribution of fund marketing materials, and reports, more aerodynamic so to speak. This hub, or document manager, allows fund managers to track engagement with these materials, providing insights into investor interest and behavior.

Book a Vestlane Consultation

With more than 220 leading funds already on the platform and more than 6,000 LPs onboarded, Vestlane could be the tech solution to ease your compliance worries.

Contact our experts here for a full, detailed overview on Vestlane workflows, features, integrations, and more.