Regtech could boost compliance
Regulatory changes and technological developments or ‘regtech’ offers the opportunity to better detect and respond to misconduct in the financial services industry, according to the Australian Securities and Investments Commission (ASIC).
In his address to the ASIC Annual Forum 2017, chairman, Greg Medcraft said regulatory technology would change the nature and culture of financial markets, services and institutions.
“Through increasing access to data and more sophisticated analytic tools, we can be more proactive and pre-emptive in understanding and addressing the risks we see,” Medcraft said.
Other benefits of regtech included the ability to empower businesses to better train their staff and manage compliance risks and improve confidence in risk management in businesses to curtail liability that could stem from non-compliance.
“Last month, we hosted a roundtable on regtech and a theme that emerged was that regtech can have implications for promoting a good culture in financial services firms as well,” Medcraft said.
“Business models such as Red Marker not only detect misconduct, but they also educate when they detect possible issues.”
However he warned the growing ability of technology to capture, store and analyse data would increase the risks of that data being misused and the systems that stored data being vulnerable to cyber-attacks.
He also said privacy would be an issue, while consumer data may be shared with others without consumer consent.
“As we see the potential of automated financial services, and AI [artificial intelligence] playing a role, we need to look to the algorithms behind these services. These algorithms will need to be transparent so their decisions can be challenged, and not just be considered opaque ‘black boxes’.
AUTHOR
Malavika Santhebennur
Recommended for you
The Reserve Bank of Australia (RBA) has lowered rates to a level not seen since mid-2023.
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
