Out-Law News | 20 Jul 2016 | 1:26 pm | 2 min. read
Christopher Woolard, the FCA's director of strategy and competition, made the comments in a speech on innovation in 'regtech' on Wednesday morning at an event part of London Fintech Week.
Expert in financial services and technology Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, who attended the event, said: "There is nothing in anti-money laundering legislation or guidance that mandates paper processes in the context of customer identity verification. Christopher Woolard's comments are, however, a significant acknowledgment from the UK regulator that digital IDs in financial services can be implemented in line with the regulatory due diligence requirements."
Woolard's comments came on a day when the FCA outlined its approach to regulatory technology (regtech) for 2016/17 (18-page / 459KB PDF). The regulator said it has "an active role to play in regtech" and revealed plans to help companies develop technology that can support regulatory compliance in the financial services sector. However, the FCA said it will continue to give firms the freedom to focus on maintaining their legacy IT systems instead if they want to.
"We intend to concentrate our efforts on increasing our engagement and collaboration with the regtech community, using our convening authority to help bring together market participants to work on shared challenges; and to act as a catalyst for change that helps to unlock the potential benefits of technology innovation," the FCA said. "There is also a potential, but limited, role for the regulator to play in supporting the industry to define standards and guidelines in order to provide more certainty for firms purchasing new technology capabilities."
"There are limitations to the role the FCA can play. The complexity, scale and diversity of legacy infrastructure and existing systems within some financial services firms, makes the implementation of new technologies challenging. That some firms will continue to choose to invest in legacy systems rather than new technologies is a matter for their leadership not the regulator," it said.
The FCA's views were expressed in response to comments it received from industry during a call for input exercise on regtech held late last year and earlier this year.
The FCA said there had been "an outstanding level of interest" in its consultation. It said 43% of the more than 350 companies that provided it with views were technology suppliers. More than 60% of the total responses came from senior leaders or board-level executives, in "an indication of how important the industry sees regtech", it said.
In its paper the FCA highlighted a range of technologies that businesses had suggested could be deployed to make it easier for firms to comply with financial regulations.
Examples included cloud-based software and services, big data analytics, application programme interfaces (APIs) and systems for tracking, in real time, transactions, behaviour and communications to help flag risks and fraud.
Biometrics was also flagged as a potential tool for improving verification of customer identity, and the potential for artificial intelligence, blockchains and a new interactive "robo-handbook" was also referenced.