6th Annual Summer Kickoff Mixer July 14 at SPACES, Toronto

A Regulation Revolution In Financial Services

Forbes | | Dec 2, 2018

regtech revolution - A Regulation Revolution In Financial ServicesIf your professional interests take you to the crossroads of financial services, regulation, compliance, and digital - especially data analytics and machine learning - which altogether is known as regtech, you are in the right place. You are part of statistically small and very geek-oriented professional community, but you know this, and though you might choose not to admit this to strangers at this year's festive parties for fear of causing great pain by boredom, you are in good company with this Contributor and my interviewee.

I first met Jo Ann Barefoot when I was chairing the U.K. Financial Conduct Authority (FCA) Industry Sandbox Consultation, where she provided excellent guidance and insights. Jo Ann is one of the most dedicated and busiest advocates of the regtech space on the planet and is truly outstanding in both her knowledge and passion in this area.

She dedicates her time to a number of global bodies and initiatives related to regtech: she is a Senior Fellow Emerita at the Harvard Kennedy School Center for Business & Government, a Senior Advisor to the Omidyar network, sits on the fintech advisory committee for FINRA, is an Executive Board Member of the International RegTech Association (IRTA), is a member of the Milken Institute U.S. FinTech Advisory Committee, and chairs the boards of the Center for Financial Services Innovation and FinRegLab.

See:  Exploring cryptoasset regulation

A former Deputy Comptroller of the Currency and staff member at the U.S. Senate Banking Committee, she is the CEO of Barefoot Innovation Group, the Co-Founder of Hummingbird Regtech, an angel investor, advises financial companies and governments worldwide, delivers a regular podcast with global industry specialists on RegTech, and if all of that is not enough, she is writing a book on financial innovation and regulation.

If you want to understand how technology and the digital revolution will impact regulation and compliance in financial services, Jo Ann Barefoot should be one of your global gotos.

Jo Ann is in London speaking at the RegTech Rising Summit this week so I took the opportunity to get her views on this often technical subject and get us excited about where retech is going.

Lawrence Wintermeyer:  Jo Ann, you do a lot of work in the new field of “regtech.” Can you give us a simple definition of regtech, and tell us who is excited about it?

Jo Ann Barefoot: You’re right about the excitement, which is notable since most people don’t find financial regulation exciting. Something truly new is happening.

“Regtech” is new-generation technology that’s transforming financial regulation and compliance. The same technologies that are remaking everything else, like big data, artificial intelligence, blockchains, cloud computing and voice interface, are revolutionizing the regulatory realm too. They offer the tantalizing prospect of improving regulatory results and cutting costs, at the same time.

Both regulators and regtech firms are attacking pain points in the regulatory chain. Examples include creating “machine-readable” regulations; automating reporting interfaces to enable continuous monitoring of risk; using AI to scan securities market information for signs of misconduct; and equipping mobile phones with chatbots so consumers can report financial scams.

Wintermeyer: I know you’re a former bank regulator. How did you find yourself involved in the regtech space?

See:  Crypto Bear Market Gives UK Regulators Breathing Space to Finalize Crypto Regulation

Barefoot: I’ve been a regulator, Senate staffer, and consultant. About five years ago, I started immersing in new technology, partly through a senior fellowship at the Harvard Kennedy School Center for Business and Government. I realized that current regulation is failing in areas like consumer protection and anti-money laundering and that new technology could do better. I now focus on helping convert financial regulation to “digitally-native” design, and I’ve co-founded a regtech firm, Hummingbird, which combats money laundering.

Wintermeyer: Anti-money laundering, or AML, is one of the most advanced regtech use cases, and the statistics are frankly shocking. The UN says we currently catch less than 1 percent of global financial crime because of technology which is out of date and unscalable. What are the most promising changes emerging?

Barefoot: AML is probably the most expensive and risky regulatory area for banks -- the industry spends at least $30 billion a year to catch that minuscule fraction of cases. And remember, the crimes funded with laundered money are violent -- terrorism and global trade in drugs, weapons, endangered animals, and human beings. A million children are trafficked every year. This is easy money, highly profitable, with low chance of being caught.

Technology can change that. Financial crimes have data typologies, distinctive patterns that become easy to spot if we can consolidate and analyze enough information. Today’s machine learning tools can find the patterns, while new encryption techniques can make it safe to share data much more widely while safeguarding privacy. Technology can also fix the AML “Know-Your-Customer” rules, which currently block millions of innocent people from financial access because they lack traditional identity documents. New digital identity techniques can screen nearly everyone, cheaply and accurately.

We have the technology to do all this well. We need to update the regulations.

Wintermeyer: Regulators currently seem preoccupied with decentralized cryptocurrency exchanges as platforms for money laundering and terrorist financing, which appear marginal next to what is going on in the real global banking system. Does regtech have a role to play here?

Barefoot: Crypto bedevils policymakers because it breaks the molds and because it’s mutating too fast for traditional regulation to keep up. Blockchains arguably have higher promise, and higher risk, than any other innovation except maybe AI. They can accelerate financial processes and reduce costs, whether by moving payments on the internet or enabling new ways to raise capital. Most regulators aim for a balance between over- and under-regulating, but the learning curve is daunting. The road will be bumpy.

Wintermeyer: There is a movement globally toward financial regulators adopting “regulatory sandboxes” to assess fintech innovation in products and processes. Will we soon see regtech sandboxes where regulators could experiment with new technologies like artificial intelligence, machine learning and blockchains? Will we see more regulatory sandboxes being launched by US regulators?

See:  UK banks publish fintech collaboration toolkit

Barefoot: I hope so! Traditional regulatory change is slow. Technology change is fast, and accelerating. The widening gap between the two is loaded with risk for consumers, the financial system, and regulators themselves. One official has said that if regulators hold still today, they’re actually “accelerating backward.”

We can’t speed up regulatory change, soundly, unless regulators can learn faster, and that requires letting them do small-scale experimentation. Regulators throughout the world are creating sandboxes, greenhouses and reglabs: safe, risk-controlled spaces where they can try things out, study how new products and practices really work, and learn hands-on. In the US, the Bureau of Consumer Financial Protection has launched a sandbox-type program, as has the Commodity Futures Trading Commission (CFTC). All the federal US regulators and several states have innovation initiatives launched or planned. Most focus more on testing fintech than trying regtech, but both are coming.

Wintermeyer: You often highlight a remarkable initiative of the UK’s Financial Conduct Authority to test “machine-executable regulation” -- issuing some regulations in the form of computer code rather than words. Is this possible? If so, what changes will it bring?

Barefoot: The FCA is the world’s most innovative regulator and they’ve taken a breathtakingly creative step, running a test of whether some regulations could be issued in the form of code and become, in effect, self-implementing. That could drastically reduce compliance costs, mistakes, and time lags.

The experiment was held under an FCA-invented process called a “tech sprint,” which is essentially a hackathon. Experts in financial regulation and technology teamed up to translate a regulatory reporting requirement from words into code and run it against a set of test data. When the computer produced a correct report -- in ten seconds -- the participants jumped up and cheered. Think about that. When was the last time we saw banks and regulators cheering together?

Wintermeyer: US regulators participated in one of these FCA tech sprints this year, and I know some have regtech initiatives on the drawing board. What path do you see the US taking along with regtech?

See:  5 ways regulation can be a competitive advantage to British business

Barefoot: America has a uniquely fragmented regulatory structure which, for all its strengths, impedes innovation. We can’t readily change it, so we need to make it work better through more innovation and more interagency collaboration.

That’s happening. The Treasury Department issued a fintech report this year that calls on the federal financial agencies both to innovate and to coordinate. There’s a lot of momentum developing.

Continue to the full article --> here


NCFA Jan 2018 resize - A Regulation Revolution In Financial Services The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - A Regulation Revolution In Financial ServicesFF Logo 400 v3 - A Regulation Revolution In Financial Servicescommunity social impact - A Regulation Revolution In Financial Services

Support NCFA by Following us on Twitter!






NCFA Sign up for our newsletter - A Regulation Revolution In Financial Services



Not to be missed! Registration NOW OPEN!

Help us kickoff the Summer in style


NCFA Summer Kickoff Jul 14 2022 800 - A Regulation Revolution In Financial Services




Balance | George Bordianu | Jun 28, 2022 Balance celebrates turning five and surpasses $500M of assets under custody TORONTO - June 28, 2022 - Balance is proud to celebrate five years in business serving Canadians as the country's top digital asset custodian. Founded in June 2017, the company introduced its custody services in a closed pilot in August 2018. The public launch followed one year later, the first of its kind in Canada. Having surpassed $500M of assets under custody (over $2.5B ahead of the recent market pullback), this makes Balance not only the oldest Canadian digital asset custodian, but also the largest. “Our focus since day one has been to build a world-class solution for Canadian businesses. To compete with established giants such as Coinbase and Gemini, we eschewed vending ready-made solutions and instead built our offline and warm infrastructure in-house. It wasn’t an easy challenge. It took us over one year of building and one year of polishing before our public launch. We’re grateful to our early backers at Techstars and Bicameral Ventures for sharing the vision and taking bet on us. The Canadian ecosystem is better off as a result.” - George Bordianu, Chief Executive Officer ...
Read More
Balance celebrates 5 years of business - A Regulation Revolution In Financial Services
Spotify Podcast | Matt Odell | Jun 24, 2022 Our privacy is continuously being eroded. Current best estimates are that 2.5 million terabytes of data are produced every day. A material amount of that information has extremely lax privacy protection: 98% of Internet of Things data is unencrypted; 83% of companies encrypt less than half the data they store on the cloud; 25% of websites are visited without encryption. See:  Will The ECASH Act be the Answer to Privacy and Virtual Currency in the U.S.? Vast amounts of the data we freely shed are stored, analysed and triangulated for commercial reasons. These tactics are so sophisticated that it’s not uncommon for people to think companies are listening to their conversations. We are being squeezed for our data in almost all aspects of our lives while cash, traditionally the only semi-private way of transacting, is being removed from society, and CBDCs inch closer to reality. Imagine if companies or governments could access and track your income, store of wealth and all those with whom you transacted. What is currently unnerving behaviour by those who track our data could rapidly become something much more maligned and coercive. Perfect privacy, whether with bitcoin ...
Read More
Privacy matters - A Regulation Revolution In Financial Services
Chainanalysis | Team | Jun 27, 2022 Decentralized autonomous organizations (DAOs) are a staple of web3. Internet-native and blockchain-based, DAOs are intended to provide a new, democratized management structure for businesses, projects, and communities, in which any member can vote on organizational decisions just by buying into the project. At a high level, this is how DAOs work: DAO founders create a new cryptocurrency, known as a governance token; They distribute these tokens to users, backers, and other stakeholders; Each token corresponds to a set amount of voting power within the organization. Each token also corresponds to a price on the secondary market, where it can be bought and sold at will. See: Sounds like a DAO, Looks like a DAO: Introducing the Modern Digital Organization While this process is often described as a way to decentralize power, governance token data suggests that DAO ownership is highly concentrated. The concentration of governance token holdings By analyzing the distribution of ten major DAOs’ governance tokens, we find that, across several major DAOs, less than 1% of all holders have 90% of voting power. This has meaningful implications for DAO governance: For example, if just a small portion of the top 1% ...
Read More
DAOs  - A Regulation Revolution In Financial Services
TechCrunch | Jacquelyn Melinek | Jun 27, 2022 Crypto exchange FTX is open to partnering with Robinhood Markets, its CEO Sam Bankman-Fried said in a statement shared with TechCrunch. Bloomberg News reported earlier that people familiar with the matter said FTX was exploring opportunities to acquire Robinhood, but Bankman-Fried denied those claims. “We are excited about Robinhood’s business prospects and potential ways we could partner with them, and I have always been impressed by the business that Vlad and his team have built,” Bankman-Fried said. “That being said there are no active M&A conversations with Robinhood.” See:  US FTX Crypto Exchange Acquires Alberta-based Bitvo and Plans to Officially Launch in Canada In a comment to TechCrunch, a Robinhood spokesperson pointed to its dual-class shareholder setup, in which the company’s founders control more than half of its voting power. As such, no deal can be struck to purchase the company without their explicit approval. Given the tenor of the note, TechCrunch doubts that Robinhood’s founding duo are salivating at a chance to sell their business. After the news broke earlier today on the possibility of an acquisition, Robinhood shares spiked 14% before falling nearly 3% in after-hours trading. Last month, Bankman-Fried ...
Read More
Robinhood  - A Regulation Revolution In Financial Services
GSMArena | Ricky | Jun 24, 2022 Osom is a privacy-focused tech company that was expected to launch the OV1 smartphone from the team of engineers that built the Essential PH-1. In a turn of events, the OV1 will now be a new blockchain-focused smartphone by Solana Mobile called the "Saga" and it will still be manufactured by Osom. The Solana Saga will be tightly integrated with Solana’s blockchain, capable of making transaction in web3 and will support holding digital assets including tokens and NFTs. At an event in New York, the company also introduced the Solana Mobile Stack. This is “a framework for Android allowing developers to create rich mobile experiences for wallets and apps on Solana.” The Solana Mobile Stack SDK is already available for developers. See:  Multiple Payment Methods – Why is it Fundamental to E-Commerce Success? Interestingly, prospective buyers can pre-order a Solana Saga starting today for a refundable deposit of $100. The Saga will retail for $1000 and those who pre-order may receive a Saga Pass that includes an accompanying NFT and “the first ticket to influencing the direction of the SMS platform. The device is expected to arrive in early 2023 and will initially ...
Read More
OSOMs Solana Saga - A Regulation Revolution In Financial Services
CSA | Jun 27, 2022 Vancouver and Toronto – The Canadian Securities Administrators (CSA) announced today that the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) have approved Andrew J. Kriegler as Chief Executive Officer (CEO) of the new self-regulatory organization (SRO) when it is formed. Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers: The appointment of a CEO is an important milestone in the creation of the New SRO. Mr. Kriegler  can now work with the boards and staff of each of the MFDA and IIROC to ensure a smooth transition that is responsive to the interests of their stakeholders. See:  IIROC to continue Client-Focused Reforms review with focus on KYC and suitability As announced in , the New SRO will consolidate and enhance the functions of IIROC and the MFDA. In addition, a new investor protection fund (IPF) will consolidate the Canadian Investor Protection Fund and the MFDA Investor Protection Corporation into a single fund that will be independent from the new SRO. Mr. Kriegler, whose appointment was approved by the boards of the existing SROs, has led IIROC since 2014. Before joining IIROC, he ...
Read More
Andrew J. Kriegler - A Regulation Revolution In Financial Services
Linklaters | Ben Packer, Richard Hay, Michael Munk, Sophia Le Vesconte, Bonnie Yeung | Jun 27, 2022 The judgment in Tulip Trading Ltd v Bitcoin Association for BSV and Others sheds light on the legal relationship between the software developers behind various bitcoin networks and their participants. Notably, the court found that there was no case to be made that the developers had a duty to take action to undo the effects of an alleged theft. At the same time, the possibility of other legal duties falling on developers in the future was left open. Players in the crypto markets should be cognisant of this position, amid ongoing market turmoil. The decision  Earlier this year, the High Court denied a prominent bitcoin holder, whose private keys to substantial holdings were allegedly taken in a cyber-attack, the right to serve a legal claim on a group of developers for failing to take action to restore the lost value into the claimant’s hands. See:  Code is Law Case: A Hamilton teen ‘hacked’ US$16 million in crypto (while he may not be in the wrong) The case was brought by Tulip Trading Ltd (“Tulip”), which claimed that the defendants were the core developers ...
Read More
English court decision - A Regulation Revolution In Financial Services
Herbert Smith Freehills | Hannah Cassidy | Jun 27, 2022 The government acknowledges that the VASP licensing regime will be more rigorous and comprehensive than those in Singapore, the UK and Japan. The Hong Kong government has gazetted amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to enhance Hong Kong’s anti-money laundering and counter-terrorist financing (AML/CFT) regulatory regime. The amendments will be introduced into the Legislative Council (LegCo) for first reading on 6 July 2022.  A LegCo brief sets out an overview of the amendments, which follows the consultation conclusions published by the Financial Services and the Treasury Bureau in May 2021 on the proposed changes (see our 2021 briefing). VASP licensing regime A new licensing regime for virtual asset service providers (VASPs) to be administered by the Securities and Futures Commission (SFC). It is proposed that the AMLO amendments relating to the VASP licensing regime will come into effect on 1 March 2023. Once in force, any person who seeks to carry on a business of providing a virtual asset service (currently limited to operating a virtual asset exchange (VA exchange)) will be required to apply to the SFC for a licence. See:  Hong Kong’s Web3 ‘Mr. Metaverse’ vs. Mark Zuckerberg Operating a VA exchange entails providing services ...
Read More
VASP - A Regulation Revolution In Financial Services
CSA | Release | Jun 27, 2022 Montreal – The Canadian Securities Administrators (CSA) today released the2022-2025 CSA Business Plan, which outlines the priorities of its members over the next three years. The plan coincides with the appointment of Stan Magidson, Chair and CEO of the Alberta Securities Commission (ASC), as the new Chair of the CSA for a three-year term, effective July 1, 2022. See:  Why is FinTech so hard to regulate? 5 Challenges for Regulators This new plan re-affirms the CSA’s commitment to responsive and harmonized regulation across Canada and alignment with international standards, where appropriate. In particular, the 2022-2025 Business Plan sets out six strategic goals focused on maintaining investor confidence in, and ensuring efficient operation of, the Canadian capital markets. The strategic goals are: Implement improvements to strengthen the capital markets regulatory system. Optimize investors’ ability to contribute to policymaking and expand investor education outreach. Improve investor protection by enhancing investors’ ability to obtain redress and by strengthening the advisor-client relationship. Address emerging market issues and trends. Deliver smart and responsive regulation that protects investors while reducing regulatory burden. Promote integrity and financial stability through effective market oversight. See:  Fraud Prevention Month: CSA encourages Canadians to ask ...
Read More
Protecting investors - A Regulation Revolution In Financial Services
Guest Post | Jun 27, 2022 The insurance industry is growing very fast with new technologies such as the use of satellite imagery to design agriculture insurance to mitigate financial losses due to climate change. Other insurance startups that have stood out this year use Artificial Intelligence (AI), data science, chatbots, APIs, etc., to transform the industry. You can see these drastic changes happening in the fintech industry, especially in the Canadian finance sector. But in this article, some of the best insurance startups are collected and reviewed. Best Insurance Startups To Watch The following are some insurance startups that you need to watch in 2022 for their innovative products in the market. They have revolutionized the insurance industry to meet the ever-changing needs in the market. Pula Pula is a Kenyan insuretech startup that has a focus on digital and agricultural insurance. It offers insuretech for small-scale farmers in Kenya by offering them agricultural insurance and digital products to help them boost their farm yields and step up their income. So far, the company has over 5.1 farmers insured and over 3 million hectares insured. It has paid out over 200,000 claims amounting to 13.5 million Kenyan shillings as ...
Read More
Insurtech startups to watch - A Regulation Revolution In Financial Services

 

Leave a Reply

Your email address will not be published. Required fields are marked *