The Role of RegTech and FinTech in finding regulatory support and driving efficiencies & effective compliance:

Firstly, it’s worth defining what RegTech and FinTech mean. Two common definitions can be shown as follows:-

FinTech’ is the term which describes the intersection between finance and technology. It can refer to technical innovation applied in a traditional financial services context or to innovative financial services that disrupt the existing financial services market.
‘RegTech’ is the adoption and use of technology to assist financial services firms to understand and meet their regulatory requirements more efficiently or effectively.

In consideration of these two matters it is clear that regulators (FCA, GFSC, and JFSC) have both on their minds.

For example and looking at the FCA’s Risk Outlook RegTech [1] is highlighted as a fast evolving issue. In this document the FCA say;

We will use the results from our Call for Input on RegTech to shape our strategy to reduce the regulatory burden on firms on both RegTech and FinTech, while delivering greater compliance. We will also define our, and the industry’s, risk tolerances in this area. Our support of RegTech enables more efficient and effective regulation and compliance

Closer to home the Guernsey Financial Services Commission (GFSC] has stated

It wants to work with it the industry to ensure the Bailiwick’s regime on anti-money laundering and countering the financing of terrorism provides for the advance in technology in fulfilling due diligence obligations. They further stated in June 2016 that its framework hindered firms in taking advantage of technological developments in the field of due diligence.

The GFSC feedback statement on supporting the development and adopters of RegTech provides an interesting look into its thinking about its role in the industry and how it is looking to shape its future development [2]. Further and following a short consultation with industry the GFSC issued 07 July 2016 revised Annexes to the Financial Services Business (“FSB”) and Prescribed Business (“PB”) Handbooks on the use of technology in the customer due diligence process [3].

The Jersey Financial Services Commission [JFSC] says [4] it encourages innovation in the financial services industry by:

Providing help for innovative businesses to understand how the regulatory framework applies to them and their proposed products and services
Listening to and engaging with industry, considering relevant policy where appropriate to foster the development of innovative products or services
Working to ensure a technologically neutral regulatory regime wherever possible
Working closely with key stakeholders, including the States of Jersey, industry bodies, and international standard setters to ensure that Jersey is well placed to respond quickly to new innovations in financial services

The Regulators Role in the RegTech Industry

Taking account of the above it seems the main outcomes the Regulators are seeking within the RegTech industry is to improve support and promote the adoption of technology that improves both regulatory compliance and the interface between the regulator and the regulated.

Both of these aims are also shared by Comsure’s ITrackRisk [footnotes 5, 6, 7]

ITrackRisk’s solution is to help to streamline the AML compliance monitoring process and enables more efficient and accurate monitoring of customer risks and enhanced due diligence triggers

ITrackRisk also provides firms with comprehensive management information (MI) and a full audit trail of all Risk triggers, which can be used to demonstrate compliance to the regulator.

For the regulator, having access to this level of authoritative data can reduce the time and resource required to undertake its supervisory work. It also demonstrates a commitment, on the firm’s part, to maintaining a clear and open relationship with the regulator.