RegTech at the FCA
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Financial Services Club
Nick Cook (Head of RegTech & Advanced Analytics)
7 February 2018
2001 cutting edge
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IBM’s ASCI White supercomputer
$110 million ($150m today)
106 tons / 96,000kg
2 basketball courts
3 trillion operations per second
2017
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$500 (300,000 times cheaper)
8 pounds / 4 kgs
Smaller than a basketball court
6 trillion operations per second (twice as fast)
Moore’s Law in practice
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In 16 years, for every $1 spent, computers became 600,000 times faster
RegTech is…
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“…a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and
effectively than existing capabilities.”
We see three types of RegTech
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To improve regulatory oversight and modernise regulators
To support regulatory compliance in firms
To re-engineer / reform regulatory systems
We’re attempting to play three roles in the RegTech ecosystem
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Engaged Participant
Catalytic Convener
Evangelist / Role Model
A fourth role requested of us is not possible
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Certifier / Approver
Our RegTech activities
TechSprints
TechTalks TechKnow
Accelerators
Trials, Research and Modernisation
International
More commonly known as hackathons, these are events in which software engineers, graphic designers, project managers and subject matter experts, collaborate intensively to solve specified problems through building prototype technology solutions
Cross-industry dialogue and discussions on innovative technologies, priority use cases and regulatory/policy clarification. Raising understanding of RegTech at the C-suite level
We engage with accelerator and incubator programmes to help them target investment and mentoring efforts on companies solving regulatory challenges of interest to us
We are experimenting and adopting a number of RegTech solutions ourselves. Current projects include natural language processing, chatbots, social media analytics, graph analytics, machine-learning and visual analytics AI. We are partnering with UK universities on research projects.
We run regular sessions where we invite technology thought leaders in to inspire and educate FCA colleagues about financial innovations and new technologies.
We engage with multiple international regulators on our RegTech activities and our advanced analytics projects. We are sharing best practice and learning from others.
TechSprints
Encouraging the development of technology that would address some of the persistent issues consumers face when trying to access financial services.
To identify potential technology solutions and innovations to improve the efficiency and effectiveness of regulatory reporting
T2 – Unlocking Regulatory Reporting (November 2016)
T1 – Consumer Access (April 2016)
TechSprints
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To empower people with fluctuating mental health problems by encouraging development of technology solutions to help break the link between financial difficulty and mental health problems.
T4 – Model-Driven Machine Executable Regulatory Reporting (November 2017)
T3 – Financial Services and Mental Health (March 2017)
To explore and test the feasibility of technology innovations to deliver model driven, machine readable and executable regulatory reporting.
Regulatory Sandbox
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Space for innovators to test new ideas with real customers
Open to authorised and unauthorised businesses and technology providers – as long as they pass our ‘Eligibility Criteria’
FCA closely oversees trials using a customised regulatory environment for each pilot – including safeguards for consumers Provides intelligence on developments, trends and emerging risks
FCA Restricted
Eligibility criteria
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Criteria Examples of positive indicators
Is the firm in scope? Innovation appears to be intended for the UK market
Is it genuine innovation? Desk research produces few or no comparable offerings already established on the market
Is there a consumer benefit?
The business has identified any possible consumer risks and proposed mitigation
Is there a need for a sandbox?
The innovation does not easily fit the existing regulatory framework, making it difficult or costly to get the innovation to market
Is the firm ready for testing?
Testing plans are well developed with clear objectives, parameters and success criteria
Sandbox Statistics
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Firms accepted: 40+
UK applications from outside of Greater
London: 20+
International applications:
10+
Applications by large firms:
5+
Applications: 100+
What technologies are we seeing?
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Distributed Ledger Technology
Artificial Intelligence
Cloud
Application Programming Interface
Predictive Analysis
Biometrics
Advanced Analytics
Robo-Advice
RegTech in the Sandbox
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Lets users create an encrypted, biometric digital identity linked to their government issued ID
Monitors the movement of money and facilitates the sharing of anonymised information to help prevent financial crime
Creates commercial or personal identity and verifiable documents on a distributed ledger. In partnership with Aviva, they will provide a system for automated customer authentication Tracks updates to regulations within the FCA Handbook and aligns their implementation to internal policies
RegTech is now global
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The volume of discussion on Twitter regarding RegTech since Jan 2016 has risen dramatically
USA, UK, France, India and Canada form the Top 5 countries discussing RegTech
Tw
eets
per
month
We’re helping to increase RegTech discussion and awareness
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The FCA’s work on RegTech has created peaks in discussion on Twitter and a potential 35m impressions.
TechSprint 3
TechSprint 2
FCA feedback statement on RegTech CFI
published
TechSprint 1
The FCA RegTech
roundtables London FinTech week speech on RegTech and AI
FCA and R3 develop blockchain-
based RegTech solution
TechSprint 4 TechSprint 3+
New sandbox cohort
Our journey so far and plans for 2018
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June Commenced engagement with RegTech community
November Call for Input on “Supporting the development and adoption of RegTech” issued
April TechSprint 1 (T1) on Access to Financial Services
July Feedback Statement on Call for Input issued
November TechSprint 2 (T2) on Unlocking Regulatory Reporting
January Commenced role as advisor to R2A Programme
February T2+ follow-up to Unlocking Regulatory Reporting TechSprint
March First research project with academia commenced (Blockchain for Algorithmic Regulation & Compliance “BARAC”)
TechSprint 3 (T3) on Financial Services and Mental Health
Supported launch of R2A Programme in Jakarta
July Started TechKnow series (4 completed to date, 2018 series arranged)
August Research project on distributed ledger technology-enabled regulatory reporting system (with R3, and two Banks)
October Established RegTech & Advanced Analytics Department
November T3+ follow-up to Financial Services and Mental Health TechSprint
November TechSprint 4 (T4) on Model-Driven Machine Executable Regulatory Reporting
December AML/Digital ID technologies industry roundtables
December Vendor Evaluation for R2A Programme
February Call for Input on Machine-Executable Regulatory Reporting (February)
March First (internal) analytics hackathon
March AI/machine learning industry roundtables
May TechSprint 5 (T5) – AML/Financial Crime TechSprint
2015
2016
2017
2018
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www.fca.org.uk/regtech (includes videos from our TechSprints)
Connect on LinkedIn - (https://www.linkedin.com/in/nick-cook-15a30b12/)
11FS FinTech Insider – “RegTech Chaos Monkey” https://11fs.com/podcasts/ep234-regtech-chaos-monkey/
11FS FinTech Insider – “Money and Mental Health” https://11fs.com/podcasts/ep242-money-and-mental-health/
Barefoot Innovation – “Regulation Innovation – the FCA’s Christopher Woolard” http://www.jsbarefoot.com/podcasts/2017/12/10/regulation-innovation-the-fcas-christopher-woolard
Barefoot Innovation – “The Future of Regulation – the FCA’s RegTech Leader Nick Cook” http://www.jsbarefoot.com/podcasts/2018/1/8/the-future-of-regulation-the-fcas-reg-tech-leader-nick-cook
Wall Street Journal – “Compliance in the future: machine-executable rules” https://blogs.wsj.com/riskandcompliance/2018/01/10/compliance-in-the-future-machine-executable-rules/
CNBC – “UK Regulator looking to use AI, machine-learning to enforce financial compliance” https://www.cnbc.com/2017/07/13/uk-regulator-looking-to-use-a-i-machine-learning-to-enforce-financial-compliance.html
Finance Feeds – “FCA, BoE gear up for TechSprint to explore advantages of RegTech” https://financefeeds.com/fca-boe-gear-techsprint-explore-advantages-regtech/