More efficient and regulator backed: welcome to RegTech
RegTech may still be at the beginning of its journey to the centre of financial services, but it is set to make a huge impact once it gets there. Keith Maner, Compliance and Technical Manager at Thistle Initiatives, explains exactly what RegTech is and what it can do for both regulators and organisations…
RegTech is a relatively new word in the regulatory world, but has nevertheless become a staple of regulators and advisers over the past few years.
To define RegTech, we can look to the FCA, the UK’s conduct regulator, which explains it as “the adoption of new technologies to facilitate the delivery of regulatory requirements”. In its business plan for 2016/17, the FCA explained that this new technology would be crucial to “enable more efficient and effective regulation and compliance”.
In terms of using RegTech, Christopher Woolard of the FCA gave a speech in February 2016, in which he commented that “The FCA is encouraging firms to be innovative with technology and helping them to identify ways to integrate these new technologies into their business models. Most people refer to this as RegTech – thinking about solutions to issues that already sit squarely within the sphere of regulation”.
Since then, EY Consultants have conceptualised a ‘RegTech ecosystem’ that brings together the operations of the regulator, RegTech firms, professional services providers and financial institutions. In this model RegTech is seen as presenting benefits that are both short-term (including reduced compliance costs, flexibility resulting from sustainable and scalable solutions and better analysis resulting from advanced data analytics), and long-term (including improved customer experiences, more robust risk and compliance reporting and better regulatory reporting).
Putting it to use
Turning to RegTech in practice, a number of specific uses and methods have already been found, such as:
- Regulatory compliance automation
- Fraud prevention and anti-money laundering activities
- Compliance data warehousing and case management
- MI and reporting
- Employee surveillance.
The FCA has been an early adopter of the concept of supporting RegTech. In October 2014, it launched its ‘Project Innovate’ advice hub to encourage innovation in financial services markets.