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WHY THIS MATTERS IN BRIEF

The level of regulation is already a major burden on companies, a robo-regulator could automate compliance, lighten the load, reduce costs, and even identify crime before it happens.

 

A little while ago I wrote an article highlighting a point made by the UK’s Chancellor Philip Hammond that clearly stated the UK government was interested in creating the world’s first Robo-regulator for fintechs – a way to automatically monitor and ensure compliance without the need for any human input or immediate oversight. And now, speaking at the Personal Investment Management & Financial Advice Association (PIMFA) summit, acting director of strategy at the UK Financial Conduct Authority (FCA) Richard Monks explained in more detail how technology was set to change the regulator’s approach to supervision and enforcement of the UK financial services industry.

 

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Specifically, Monks said technological advancements were informing how the FCA tackles “the challenge of the very small number of firms who, deliberately or not, cause issues and have a disproportionate impact on trust in the [financial] market, creating costs for the industry and for consumers”.

In a concept reminiscent of Steven Spielberg’s 2002 sci-fi thriller Minority Report, he also said the FCA was looking to use Artificial Intelligence (AI) and machine learning to try to predict which firms or individuals are likely to commit financial crimes.

“This could be based on a range of data, including publicly available data, complaints data and past records of approved persons or controllers. Some of our initial trials suggest that if we invest in big data in this way, it could have a material impact in identifying those most likely to mis-sell,” said Monks.

“In the shorter term,” said Monks, “technological advancements are close to allowing the FCA to reduce compliance costs for regulated firms and boost the quality of data the regulator receives.”

 

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He also said the capacity for automated transaction reporting – whereby the FCA is automatically notified when a transaction is made “will significantly reduce the cost of regulatory reporting” and “enable [the FCA] to focus on high-risk investments and those firms most likely to mis-sell.”

“My final science fiction point – can we make the handbook machine-readable?” he said, referring to being able to digitise the FCA’s regulatory rule book which is key step that would need to happen if the FCA was to stand a chance of automating regulation. “This could see our rules automatically inputted into [banks] systems and business processes – all but eliminating compliance costs. It is certainly feasible.

“Longer term this could result in automated regulatory responses – some form of robo-regulator,” he added.

Regulation is one of the biggest burdens most industries face, especially the heavily regulated financial services industry, and the move to create a robo-regulator could not only help companies ensure compliance and dramatically reduce costs, it could create a domino effect that sees robo-regulators across other industries become the norm, not the exception.

About author

Matthew Griffin

Matthew Griffin, award winning Futurist and Founder of the 311 Institute, a global futures think tank working between the dates of 2020 and 2070, is described as "The Adviser behind the Advisers." Regularly featured on AP, CNBC, Discovery and RT, his ability to identify, track, and explain the impacts of hundreds of revolutionary emerging technologies on global culture, industry and society, is unparalleled. Recognised for the past five years as one of the world's foremost futurists, innovation and strategy experts Matthew is an international speaker who helps governments, investors, multi-nationals and regulators around the world envision, build and lead an inclusive future. A rare talent Matthew sits on the Technology and Innovation Committee (TIAC) for Centrica, Europe’s largest utility company, and his recent work includes mentoring XPrize teams, building the first generation of biocomputers and re-inventing global education, and helping the world’s largest manufacturers envision, design and build the next 20 years of devices, smartphones and intelligent machines. Matthew's clients are the who’s who of industry and include Accenture, Bain & Co, BCG, BOA, Blackrock, Bentley, Credit Suisse, Dell EMC, Dentons, Deloitte, Du Pont, E&Y, HPE, Huawei, JPMorgan Chase, KPMG, McKinsey, PWC, Qualcomm, SAP, Samsung, Sopra Steria, UBS, the USAF and many others.

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